This paper analyzes the frequently-observed phenomenon that firms offer product warranties that are of much shorter duration than the life expectancy of these products. It is shown that competitive equilibria may entail limitation of warranty duration if firms face adverse selection problems...

In a housing insurance market buildings have different damage probabilities. High-risk houses need investment, low-risk houses don't. Insurers use imperfect tests to assess risks. The market is a natural monopoly: with more than one active insurer, high-risk house owners continue to apply to...