4 ms·

Not to play the free market card too aggressively, but isn't there already a solution to this, called "extended warranties"? Whether provided by the manufactur

Not to play the free market card too aggressively, but isn't there already a solution to this, called "extended warranties"? Whether provided by the manufacturer or from the retail seller, they provide a way for customers to pay an extra fee in order to extend the product's lifetime. In theory, they even give a way to price out the effective longevity of comparable devices by looking at the prices of the warranties. In the end, my understanding is that customers do not assign a lot of value to that lifetime extension, and as a result the extended warranties are generally not purchased. If the EU enacts measures to enforce product longevity, they force customers to buy something that they have already chosen not to buy.

gmac 9y ago
My hunch: part of the problem here is that people got fleeced by retailers, who sold hugely overpriced extended warranties, banking on loss aversion and risk aversion and general lack of technological understanding. When people realised how much they had been fleeced (assisted by consumer programmes like Watchdog in the UK), many of them went off extended warranties as a mug's game — and never came back. (I once had a Xmas temp job at UK electronics retailer Dixons, commission was on profit, and one extended warranty was worth dozens of devices sold — beaten only by mobile phone contracts). So anyway, that's a reason why people's revealed preference for extended warranties might not correspond with their true preference for longevity in consumer products. It's also the case that if you can afford to insure yourself against something (like a consumer good breaking down), and average the costs across all such things, then generally you'll save money by doing so — especially if you reckon, as I do in this case, that you take better-than-average care of your consumer goods. In that case, the price of the extended warranty is a signal of expected longevity, and features in your purchase decision (lower = better), even if you don't buy it. So again, revealed preference for warranties may not equal true preference for longevity. Finally, we're collectively using and disposing of too much stuff, and one of the reasons for this is that externalities such as waste and resource depletion are not fully internalised. So even if people are not buying extended warranties, and that truly reflects an indifference to product lifespan, there may well be an argument that by "forcing them to buy an extended warranty" — which also forces the manufacturer to take responsibility for the product over a longer period, and thus pay more attention to how long it generally lasts — you get higher social welfare, despite some constraint on individual consumer freedom. Finally, people are hyperbolic discounters, they are myopic in a way that hurts their happiness, so a regulation that encourages longer-term thinking may help them in the long run. TL;DR: I think this measure has potential to be a really good thing all round.
- andrewla 9y ago
  Yes, you can argue that warranties are overpriced, but if everyone factored the price of the extended warranty into every purchase they made, then manufacturers would naturally be forced to reduce the cost of the warranty, by making their product either more reparable or increasing initial quality. > Finally, people are hyperbolic discounters, they are myopic in a way that hurts their happiness, so a regulation that encourages longer-term thinking may help them in the long run. Here it may just be my Yankee self-reliance talking, but this smacks of the worst sort of paternalism. Arguing slippery slope arguments is in itself a slippery slope, but why stop here? If buying a bigger TV is not going to make me happy (or make me unhappier) then surely a regulation should exist to prevent me from buying it. When there are significant externalities (like leaded gasoline) then government regulation is easy to justify. When the externalities are second-hand (the reduction in demand for product longevity causes reparability to become a secondary concern for manufacturers) then I'm more inclined to err on the side of "let the customer set the price of their own risk", rather than "let's just increase costs for everyone because it may or may not have a net societal benefit". I don't trust that regulatory authorities are above the myopia and are truly able to see long-term more than anyone else.
  - gmac 9y ago
    On the last point, yes this is paternalism, but I'm not convinced it's the worst sort. On your big TV example, you probably shouldn't be prevented from buying it, but other measures to discourage you from buying it could in theory be welfare-improving on a societal level, and if they were then that would constitute part of a case for imposing them.
foobarbazetc 9y ago
Most countries with strong pro-consumer groups already have minimum 2 year warranties. US-centric pro-corporatist thinking doesn't always apply to the rest of the world. This is my favorite bit of legalease: https://www.apple.com/au/legal/statutory-warranty/ https://www.apple.com/au/legal/statutory-warranty/ That page has become more friendly over time, but when they first put it up it was amazingly passive aggressive.
- andrewla 9y ago
  I guess what you see as pro-corporatist I see as pro-consumer in this case. Specifically, forcing the consumer to purchase a warranty that they would rather not purchase. I have no problem, for example, with common-law tenants of implied warranties, and in general, the right of customers to demand redress for obvious failures to meet expectations or deception on the part of companies (be the corporations or otherwise). I believe, though, that the consumer has a right to set a price on their own preference for risk, in general. In specific cases, especially where there are externalities involved, then it's reasonable to limit it (leaded gasoline, for example, or healthcare, for a more controversial (in the US) one), but I feel the starting point should be to let the consumer decide for themselves.
chipperyman573 9y ago
>Provided by... A retail seller I used to work at best buy and our "extended warranty" was basically us floating you a new unit while we RMA'd the broken one.
dredmorbius 9y ago
David Harum. It's a race to the bottom without standards enforcement. Also Market for Lemons: good product is driven out. https://en.m.wikipedia.org/wiki/David_Harum https://en.m.wikipedia.org/wiki/David_Harum
CaptSpify 9y ago
Maybe in the EU things are different, but in the US.... I've only had a couple of "extended warranties", and they were worded in such a way that they were useless. "This warranty does not cover normal wear and tear on $common_failing_part..." and the like. If they were useful, I'd buy them all the time.
- andrewla 9y ago
  This is probably closer to the fatal flaw in my argument. Even AppleCare, which is manufacturer-based, only allows two screen replacements, and charges you for both of them. I guess a middle ground could be to force (through regulation) the companies to offer a manufacturer's warranty, but I'm not sure that this approach is any better than the recommendations that the EU is calling for.

gmac 9y ago

My hunch: part of the problem here is that people got fleeced by retailers, who sold hugely overpriced extended warranties, banking on loss aversion and risk aversion and general lack of technological understanding. When people realised how much they had been fleeced (assisted by consumer programmes like Watchdog in the UK), many of them went off extended warranties as a mug's game — and never came back. (I once had a Xmas temp job at UK electronics retailer Dixons, commission was on profit, and one extended warranty was worth dozens of devices sold — beaten only by mobile phone contracts). So anyway, that's a reason why people's revealed preference for extended warranties might not correspond with their true preference for longevity in consumer products. It's also the case that if you can afford to insure yourself against something (like a consumer good breaking down), and average the costs across all such things, then generally you'll save money by doing so — especially if you reckon, as I do in this case, that you take better-than-average care of your consumer goods. In that case, the price of the extended warranty is a signal of expected longevity, and features in your purchase decision (lower = better), even if you don't buy it. So again, revealed preference for warranties may not equal true preference for longevity. Finally, we're collectively using and disposing of too much stuff, and one of the reasons for this is that externalities such as waste and resource depletion are not fully internalised. So even if people are not buying extended warranties, and that truly reflects an indifference to product lifespan, there may well be an argument that by "forcing them to buy an extended warranty" — which also forces the manufacturer to take responsibility for the product over a longer period, and thus pay more attention to how long it generally lasts — you get higher social welfare, despite some constraint on individual consumer freedom. Finally, people are hyperbolic discounters, they are myopic in a way that hurts their happiness, so a regulation that encourages longer-term thinking may help them in the long run. TL;DR: I think this measure has potential to be a really good thing all round.

andrewla 9y ago
Yes, you can argue that warranties are overpriced, but if everyone factored the price of the extended warranty into every purchase they made, then manufacturers would naturally be forced to reduce the cost of the warranty, by making their product either more reparable or increasing initial quality. > Finally, people are hyperbolic discounters, they are myopic in a way that hurts their happiness, so a regulation that encourages longer-term thinking may help them in the long run. Here it may just be my Yankee self-reliance talking, but this smacks of the worst sort of paternalism. Arguing slippery slope arguments is in itself a slippery slope, but why stop here? If buying a bigger TV is not going to make me happy (or make me unhappier) then surely a regulation should exist to prevent me from buying it. When there are significant externalities (like leaded gasoline) then government regulation is easy to justify. When the externalities are second-hand (the reduction in demand for product longevity causes reparability to become a secondary concern for manufacturers) then I'm more inclined to err on the side of "let the customer set the price of their own risk", rather than "let's just increase costs for everyone because it may or may not have a net societal benefit". I don't trust that regulatory authorities are above the myopia and are truly able to see long-term more than anyone else.
- gmac 9y ago
  On the last point, yes this is paternalism, but I'm not convinced it's the worst sort. On your big TV example, you probably shouldn't be prevented from buying it, but other measures to discourage you from buying it could in theory be welfare-improving on a societal level, and if they were then that would constitute part of a case for imposing them.

foobarbazetc 9y ago

Most countries with strong pro-consumer groups already have minimum 2 year warranties. US-centric pro-corporatist thinking doesn't always apply to the rest of the world. This is my favorite bit of legalease: https://www.apple.com/au/legal/statutory-warranty/ https://www.apple.com/au/legal/statutory-warranty/ That page has become more friendly over time, but when they first put it up it was amazingly passive aggressive.

andrewla 9y ago
I guess what you see as pro-corporatist I see as pro-consumer in this case. Specifically, forcing the consumer to purchase a warranty that they would rather not purchase. I have no problem, for example, with common-law tenants of implied warranties, and in general, the right of customers to demand redress for obvious failures to meet expectations or deception on the part of companies (be the corporations or otherwise). I believe, though, that the consumer has a right to set a price on their own preference for risk, in general. In specific cases, especially where there are externalities involved, then it's reasonable to limit it (leaded gasoline, for example, or healthcare, for a more controversial (in the US) one), but I feel the starting point should be to let the consumer decide for themselves.

chipperyman573 9y ago

>Provided by... A retail seller I used to work at best buy and our "extended warranty" was basically us floating you a new unit while we RMA'd the broken one.

dredmorbius 9y ago

David Harum. It's a race to the bottom without standards enforcement. Also Market for Lemons: good product is driven out. https://en.m.wikipedia.org/wiki/David_Harum https://en.m.wikipedia.org/wiki/David_Harum

CaptSpify 9y ago

Maybe in the EU things are different, but in the US.... I've only had a couple of "extended warranties", and they were worded in such a way that they were useless. "This warranty does not cover normal wear and tear on $common_failing_part..." and the like. If they were useful, I'd buy them all the time.

andrewla 9y ago
This is probably closer to the fatal flaw in my argument. Even AppleCare, which is manufacturer-based, only allows two screen replacements, and charges you for both of them. I guess a middle ground could be to force (through regulation) the companies to offer a manufacturer's warranty, but I'm not sure that this approach is any better than the recommendations that the EU is calling for.