Published October 4, 2017
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Consumer Markets for Warranties
- Creators
- Schwartz, Alan
- Wilde, Louis L.
Abstract
This paper considers markets for warranties when consumers are imperfectly informed about both product and warranty prices and about which firms sell with warranties and which firms sell without warranties. We characterize necessary and sufficient conditions for existence of the various equilibrium configurations of price and warranty coverage that can arise in two paradigm cases; when all consumers prefer warranties and when none do. Our results suggest that firms will exploit imperfect information by charging noncompetitive prices as well as by offering less than ideal warranty coverage, and that the former practice may be more serious in many markets than the latter.
Additional Information
Research for this paper was supported by NSF Grant #SES 81-11708. This paper benefited considerably from comments received at workshops held at the California Institute of Technology, the University of Chicago, Northwestern University, and Stanford University. Published as Schwartz, Alan, and Louis L. Wilde. "Product quality and imperfect information." The Review of Economic Studies 52.2 (1985): 251-262.Attached Files
Submitted - sswp445.pdf
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Additional details
- Alternative title
- Product Quality and Imperfect Information
- Eprint ID
- 81953
- Resolver ID
- CaltechAUTHORS:20171002-131706662
- Created
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2017-10-04Created from EPrint's datestamp field
- Updated
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2019-10-03Created from EPrint's last_modified field
- Caltech groups
- Social Science Working Papers
- Series Name
- Social Science Working Paper
- Series Volume or Issue Number
- 445