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Quality‐Assuring Price And Breach Of Express Or Implied Warranty

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  • D Vandegrift

Abstract

If consumers cannot discern quality prior to purchase, firms may use both court enforcement and the market mechanism to assure quality. But the level of warranty protection that firms choose to offer depends on the efficiency of the market. As the ability of consumers to communicate information concerning quality among themselves (market efficiency) increases, the level of warranty protection that maximizes consumer surplus falls. In highly efficient markets, producers do not offer a warranty. Thus, courts should not imply a warranty if producers do not specify one. In addition, the level of warranty protection depends on the courts' ability to distinguish between producer and consumer moral hazard.

Suggested Citation

  • D Vandegrift, 2001. "Quality‐Assuring Price And Breach Of Express Or Implied Warranty," Contemporary Economic Policy, Western Economic Association International, vol. 19(2), pages 186-196, April.
    • Handle: RePEc:bla:coecpo:v:19:y:2001:i:2:p:186-196
    DOI: 10.1111/j.1465-7287.2001.tb00060.x
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    References listed on IDEAS

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