A large literature in economics and marketing studies the problem of manufacturer's designing contracts that give a retailer appropriate incentives to make decisions that are optimal from the manufacturer's point of view (see, for example, Spengler 1950, Jeuland and Shugan 1983, McGuire and...

The marketing literature on product warranty and extended warranty has largely focused on their role as segmentation instruments in risk-averse consumer markets. Preserving this insurance rationale, we highlight the role of extended warranty in channel coordination. We derive explicit demand...