The Effect of Product Misperception on Economic Outcomes: Evidence from the Extended Warranty Market

• 成果类型: Article
• 署名作者: Abito, Jose Miguel; Salant, Yuval
• 署名单位: University of Pennsylvania; Northwestern University
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdy045
• 发表日期: 2019
• 页码: 2285-2318
• 关键词: Risk preferences; probability; CHOICE; MODEL

摘要

Panel and experimental data are used to analyse the economic outcomes in the extended warranty market. We establish that the strong demand and high profits in this market are driven by consumers distorting the failure probability of the insured product, rather than standard risk aversion or sellers' market power. Providing information to consumers about failure probabilities significantly reduces their willingness to pay for warranties, indicating the important role of information, or lack of, in driving consumers' purchase behaviour. Such information provision is shown to be more effective in enhancing consumer welfare than additional market competition.