Suppose I find lost property, and can return it to the owner. Am I required to return the object that was actually lost, or can I give the owner a duplicate? (And why?).
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I am adding an additional assumption that the item has some identifying mark that would more likely obligate you to return it. According to most opinions, an item have no identifiable markings does not need to be returned. However, if you know exactly who the owner is, you MAY need to return it, anyway, in all circumstances.
Having said this, based on what I gleaned from this jlaw.com article there is a debate.
I have excerpted what I thought was the most relevant paragraph to your question. There are many other factors involved. However, I inferred that if you decided to exchange the lost item, it means that you have possessed ownership of the item.
The article is long, but it is quite interesting reading.
The source of the mitzvah is Dvorim 22 (1-3).
Rashi on possuk 2 says
So it seems that the ideal is to return the actual object. If the object cannot be returned (in Rashi for economic reasons) then what remains of its value can be returned.
This implies that substitution is not a valid option. But I do not have a source that states that explicitly.
There is a well known principle in Gemoro that: (My translation (and understanding) of the link):
The principle of “Man wants his one measure (of produce) more than the nine measures of his friend” would exclude giving the owner a duplicate.