The Demand for Repair Service During Warranty

For many years appliance manufacturers have offered warranties with durations stated in chronological time (Gerner and Bryant 1976). Such warranties are designed to cover costs of repair in the event that the appliance fails while the warranty is in force. That appliance warranties are universally offered with chronological durations is strong evidence of the manufacturers' belief that reliability, at least during the first years of appliance life, is a technological property of the appliance. As such it is controlled by the manufacturer via product design and specification. But this view ignores the role consumers play. This paper examines consumer behavior within the warranty period. In the model the consumer recognizes that the use of an appliance is inherently risky, subject to some probability of failure. The consumer takes this into account when choosing a warranty and the amount of use of the appliance. Both the demand for the warranty comprehensiveness and the demand for use are estimated, using data on television use and repair. The estimates provide some evidence that use, and consequently repair, depends on warranty coverage.