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6 Rsch. in L. & Econ. 167 (1984)
Warranties, Tie-Ins, and Efficient Insurance Contracts: A Theory and Three Case Studies

handle is hein.journals/rlwe6 and id is 177 raw text is: WARRANTIES, TIE-INS, AND EFFICIENT INSURANCE CONTRACTS: A THEORY AND THREE CASE STUDIES Jeffrey A. Eisenach, Richard S. Higgins, and William F. Shughart II The Magnuson-Moss Warranty/Federal Trade Commission Improvement Act proscribes conditioning warranty performance on the use of brand name complementary inputs, but allows companies to apply to the FTC for ex- emptions allowing them to use such ''tie-ins in their warranties. The FTC has taken an uncompromising position toward the applications for exemp- tions it has received, denying all three and suggesting that there are prac- tically no circumstances in which an exemption would be granted. We de- velop a theory of warranties in which tie-in restrictions are seen to be a competitive response to the familiar problems of adverse selection and moral hazard that arise in insurance markets. The theory suggests that at least some tie-in restrictions may have positive welfare implications, and Research in Law and Economics, volume 6, pages 167-185. Copyright © 1984 by JAI Press Inc. All rights of reproduction in any form reserved. ISBN: 0-89232-474-0 167

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