A Consumer-Side Experimental Examination of Signaling Theory: Do Consumers Perceive Warranties as Signals of Quality?

Abstract

This article examines consumers' perceptions of warranties within the framework of economic signaling theory. We develop propositions about conditions under which higher warranties may lead to higher, lower, or the same quality perceptions as do lower warranties. These quality perceptions of consumers are consistent with different types of market equilibria predicted by signaling theory. The propositions are tested in an experiment which varies warranty length, warranty scope, and the conditions for warranty signaling. Results suggest that, in general, consumer responses to warranties are consistent with the behavioral assumptions of signaling theory. The authors suggest that consumer researchers can gain greater insight by integrating signaling theory with psychologically based approaches.