What about refunding half the dollars and letting him keep the transponder? That way you both come out even. If it's really bad the buyer gets a simple lesson in caveat emptor. And you don't lose everything. Like any compromise, neither of you are happy but both should be satisfied.
It reminds me of the time my dad ordered up a new bow pulpit for his sailboat. It was built by a local shop specializing in stainless tubing. When it arrived, it didn't fit. There was just enough fuzziness between my dad's specifications and their production that it was hard to pin down where the mistake was made. The builder couldn't reuse the tubing, and my dad couldn't mount it on the boat, so they agreed to split the cost and my dad kept the piece. The next one fit perfectly, so all worked out in the end.
