Why some car manufacturers give you different warranties

What is it about?

When you get a warranty for a car, does it reflect quality? in other words, if the car comes with longer warranty, does it mean quality is high so the manufacturer is certain it won't break down? We show that the opposite it true: warranty compensates for poor quality.

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Why is it important?

Firms face an important trade-off when defining their warranty period: while longer warranties may potentially increase product demand, they also generate significant costs. We show how much your car warranty is worth in terms of vehicle price.