Abstract: In this paper, false failure return policies in Ebusiness environment are studied for a supply chain composed of a manufacturer and a group of customers. A decision model is developed in considering customers' strategic decision making process. With this model, the optimal price, optimal stocking quantity, and optimal return price, as well as critical selling cost based on Ebusiness environment are analyzed for three different return policies respectively. These three return policies are compared with respect to the supply chain performance. Results show that when purchasing/production cost or the salvage value is very low, nonreturn policy is optimal compared with the full return policy, while the partial return policy is always superior to the full return policy for the supplier/manufacturer.

Key words: false failure returns, strategic decisions, E-business