An Investigation into the Demand for Service Contracts

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Virginia Tech

This dissertation is an investigation into the determinants of demand for service contracts on new vehicles. In the first chapter, I characterize the consumer decision to buy a service contract with a discrete choice model. Hypotheses and conjectures are tested empirically using survey data from new vehicle buyers. The second chapter consists of the development and testing of an instrument for measuring attitudes toward uncertainty. This tool is useful in gauging aversion toward weak ambiguity. Finally, in the third chapter, I use additional survey and experimental data from new vehicle buyers to further differentiate between the factors that significantly affect the service contract purchase decision. A variety of uncertainty measures and their predictive powers are discussed.

I would like to thank the John D. and Catherine T. MacArthur Foundation, Network on Preferences and Norms, for their generous financial support, which was indispensable to the completion of this research.

Experimental economics, Risk aversion, Ambiguity