Warranties reduce information asymmetry.

Question

Quizplus · Accepted Answer

Warranties provide consumers with a sense of security as it assures them that their purchased product will be functional and meet expectations for a specific time frame. It signals the seller's confidence in their product, and reduces the knowledge gap between the buyer and seller by providing additional information about the quality and reliability of the product. This reduction in information asymmetry benefits both parties involved in the transaction.

Warranties Reduce Information Asymmetry