EXTENDED WARRANTIES - A BEHAVIORAL-PERSPECTIVE

Extended warranties have become a major revenue source for durable goods retailers, prompting some retailers to use questionable practices in an attempt to maximize their sales. This paper develops an integrated framework based on prospect theory and protection motivation within which to examine these practices. Propositions are presented with respect to: (1) individual consumer difference variables which contribute to a predisposition to the extended warranty offer; and (2) the impact of (a) the timing of the extended warranty offer and (b) the use of fear appeals in the offer on consumer perceptions of product quality and value. Implications for retailers are offered.