Analysis of Product Warranties With Screening And Signaling

摘要

Warranty is an important element of marketing products as better warranty signals higher product quality and provides greater profit to manufacturers. These two uses of warranties are screening and signaling. Based on the game of product warranty between seller and buyer, optimal contracts of screening when quality is observable and optimal contracts of signaling when quality is unobservable are analyzed, and the law of product warranty for screening and signaling is disclosed.