Product Warranties and Double Moral Hazard

Russell Cooper and Thomas Ross

RAND Journal of Economics, 1985, vol. 16, issue 1, 103-113

Abstract: This article explores a model of warranties in which moral hazard problems play a key role. The goal is to understand the important characteristics of warranties, including their provision of incomplete insurance and the relationship between product quality and coverage. We analyze a model in which buyers and sellers take actions that affect a product's performance. Since these actions are not cooperatively determined, an incentives problem arises. We characterize the optimal warranty contract and undertake comparative statics to determine the predicted correlation of warranty coverage and product quality.

Date: 1985
References: Add references at CitEc
Citations: View citations in EconPapers (138)

Downloads: (external link)
http://links.jstor.org/sici?sici=0741-6261%2819852 ... O%3B2-J&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
Working Paper: Product Warranties and Double Moral Hazard (1984)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rje:randje:v:16:y:1985:i:spring:p:103-113

Ordering information: This journal article can be ordered from
https://editorialexp ... i-bin/rje_online.cgi

Access Statistics for this article

More articles in RAND Journal of Economics from The RAND Corporation
Bibliographic data for series maintained by ().