easy · GRE Verbal
Why would a manufacturer volunteer a long warranty when doing so exposes it to costly repairs? A common answer treats the warranty as a signal. A firm confident in its product can afford a generous guarantee, because few units will actually fail; a firm secretly aware of shoddy workmanship cannot, since the claims would bankrupt it. Buyers, unable to inspect quality directly, may therefore read the length of a warranty as a credible clue to reliability. On this view the warranty's chief value lies less in the repairs it funds than in the information it conveys before any sale is made. The coverage is real, but it works largely by allowing a strong firm to distinguish itself from a weak one that cannot bear to imitate it.
The passage suggests that a lengthy warranty serves chiefly to accomplish which of the following?
- Reimburse buyers for the great majority of repairs they will need.
- Lower the manufacturer's cost of producing each individual unit.
- Communicate a firm's confidence in its product's reliability.
- Discourage buyers from inspecting products before purchase.
- Guarantee that no unit the firm ever sells will fail.
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