Maytag offers a 10 year warranty on washers and dryers, and consumers are willing to pay...
Maytag offers a 10 year warranty on washers and dryers, and consumers are willing to pay more for Maytag products than for Kenmore products. Kenmore could charge more for their products if they offered a similar warranty, but they choose not to. Why?
Homework Answers
It has been stated that Kenmore could charge more for their products if they offered a warranty like Maytag.
If Kenmore offers the similar warranty then it will have to incur additional cost to have resources and personnel to successfully provide such warranty. So, marginal cost of Kenmore will increase.
With similar warranty like Maytag, Kenmore can charge higher price. This will lead to increase in revenue. So, marginal revenue of Kenmore will also increase.
However, it is stated that Kenmore chose not to provide such warranty.
This indicates that Kenmore expects the increase in marginal cost to be greater than the increase in marginal revenue.
Such scenario would adversely impact the profitability of the Kenmore.
So, adverse impact on profitability due to expected increase in marginal cost being greater than the expected increase in marginal revenue as Kenmore offers similar warranty and charge more for their products restrains the Kenmore from offering a warranty just like Maytag.
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Maytag offers a 10 year warranty on washers and dryers, and
consumers are willing to pay...
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