If a firm produces high- quality goods and has extensive quality control mechanisms in place why do they offer warranties?
A)all firms offer warranties and that is the Nash equilibrium
B)consumers won't purchase goods without warranties
C)consumers don't fully understand product quality
D)a warrantee is a signal to the market

Question

Quizplus · Accepted Answer

A warranty is a signal to the market that the firm is confident in the quality of their product. It can also serve as insurance for consumers in case there are any issues with the product.

If a Firm Produces High- Quality Goods and Has Extensive