Extended Warranty Management in the Department of Defense.

摘要

We provide a formal economics model to help consumers understand what types of warranty may be provided by producers, and to help consumers make decisions as to what type of warranty to select. To maximize profit, a producer always wants to sell with some type of warranty as opposed to selling with no warranty. The extended warranty is more likely to be provided as the consumer becomes more patient, as the producer becomes impatient, or if the likelihood of product failure does not increase too much in the extended period. Finally, we show that there is a separating equilibrium in which the high-quality producers sell with warranties and the low-quality producers sell without warranties, with the consumer purchasing from the high-quality producer. These results also suggest that the consumer, or the DoD, may want to consume partly from the low-quality producer (via split bid procurement, etc.) to keep the competition between the producers. If there is only a single producer, the producer is able to extract more value from the consumer and generate a higher profit. The consumer generates a higher value when there are two producers, compared to having only one producer, as in our analysis.