Supply chain return freight insurance and pricing strategy considering consumer risk avoidance

In response to the return dispute between buyers and sellers in online transactions, e-commerce platforms have introduced return freight insurance to share the risk of product returns, but lenient return policies can also contribute to excessive returns. Thus, third-party insurance companies were incorporated into the Stackelberg game, which was dominated by the manufacturer and followed by the online retailer. Taking into account return behavior and freight insurance sensitivity of risk-averse consumers, three pricing return models with the participation of multiple decision makers, namely, the seller's freight insurance, the buyer's freight insurance and the shared freight insurance, were developed to analyze pricing decisions and freight insurance strategies of the online retailer. The results show that consumers’ risk aversion attitudes benefit to reduce the product price and freight insurance price, thereby increase market demand and profits for all members involved. The co-sharing mechanism for freight insurance can be effective in mitigating customer loss, and when the return rate is low, consumer preferences for return freight insurance are advantageous for the profitability of the overall supply chain.