The Informational Role of Warranties and Private Disclosure about Product Quality¶
Grossman, S. J. (1981). The Informational Role of Warranties and Private Disclosure about Product Quality. Journal of Law and Economics, 24(3), 461-483.
Cited by¶
2 citations across 2 artifacts.
Each citation links to the sentence it supports in the citing article.
Mechanisms¶
- Credible Guarantee or Warranty
- The warranty works as a signal not because buyers suddenly trust the brand, but because a fly-by-night maker of unreliable tools could not afford to offer it — they would drown in warranty claims within a year.
This sourceShows how enforceable warranty obligations can signal product quality because warranty performance is more costly for sellers of lower-quality products.
- The warranty works as a signal not because buyers suddenly trust the brand, but because a fly-by-night maker of unreliable tools could not afford to offer it — they would drown in warranty claims within a year.
- Warranty or Guarantee Requirement
- The warranty is a credible signal precisely because it is cheap for the honest seller and expensive for the dishonest one — so the requirement sorts the pool by who is willing to carry it.
This sourceShows how warranties can convey otherwise hidden product quality because low-quality goods create a greater expected warranty burden than high-quality goods.
- The warranty is a credible signal precisely because it is cheap for the honest seller and expensive for the dishonest one — so the requirement sorts the pool by who is willing to carry it.
Verification¶
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