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Why Do Consumers Buy Extended Service Contracts?

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  • Tao Chen
  • Ajay Kalra
  • Baohong Sun
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    Abstract

    We examine purchases of extended service contracts, which are essentially insurance products, for electronic products in a retail setting. The primary insurance purchase determinants are perceived probability of loss, extent of loss, risk aversion, and amount of insurance premium. We examine how product characteristics (hedonic/utilitarian, manufacturer's warranty) and retailer actions (promotions, feature advertising) influence the purchase of extended service contracts. We also investigate the impact of consumer characteristics (income, gender, and prior usage) on these insurance purchase determinants. To test the predictions, we use revealed preferences from panel data of electronic purchases across several product categories. (c) 2009 by JOURNAL OF CONSUMER RESEARCH, Inc..

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    File URL: http://www.journals.uchicago.edu/doi/pdf/10.1086/605298
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    Bibliographic Info

    Article provided by University of Chicago Press in its journal Journal of Consumer Research.

    Volume (Year): 36 (2009)
    Issue (Month): 4 (December)
    Pages: 611-623

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    Handle: RePEc:ucp:jconrs:v:36:y:2009:i:4:p:611-623

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    Web page: http://www.journals.uchicago.edu/JCR/

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    Cited by:
    1. Willem Boom, 2011. "Price Intransparency, Consumer Decision Making and European Consumer Law," Journal of Consumer Policy, Springer, vol. 34(3), pages 359-376, September.
    2. Marieke Huysentruyt & Daniel Read, 2010. "How do people value extended warranties? Evidence from two field surveys," Journal of Risk and Uncertainty, Springer, vol. 40(3), pages 197-218, June.

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