Faced with a reputation for producing automobiles with poor repair records, a number of American companies have

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Faced with a reputation for producing automobiles with poor repair records, a number of American companies have offered extensive guarantees to car purchasers (e.g., a seven-year warranty on all parts and labor associated with mechanical problems).
a. In light of your knowledge of the lemons market, why is this a reasonable policy?
b. Is the policy likely to create a moral hazard problem? Explain.
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Microeconomics

ISBN: 978-0132857123

8th edition

Authors: Robert Pindyck, Daniel Rubinfeld

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