American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Can Warranties Substitute for Reputations?
American Economic Journal: Microeconomics
vol. 3,
no. 3, August 2011
(pp. 69–85)
Abstract
In markets where product quality is imperfectly observed or delivery is uncertain, seller reputations and product guarantees or warranties can impact equilibrium prices and quantities. Using data from a decentralized online market, this paper empirically investigates the substitutability of product guarantees for seller reputation. I find that a "guaranteed or your money back" promise from the market maker does not substitute for reputation, either in determining price or the probability of sale. The most likely causes of the policy's ineffectiveness are delays in buyer response to the guarantee and skepticism about reimbursement in the event of fraud. (JEL D82, L14, L15, L81, M31)Citation
Roberts, James W. 2011. "Can Warranties Substitute for Reputations?" American Economic Journal: Microeconomics, 3 (3): 69–85. DOI: 10.1257/mic.3.3.69Additional Materials
JEL Classification
- D82 Asymmetric and Private Information
- L14 Transactional Relationships; Contracts and Reputation; Networks
- L15 Information and Product Quality; Standardization and Compatibility
- L81 Retail and Wholesale Trade; e-Commerce
- M31 Marketing
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