CUSTOMERS tend to agonise over the relative merits of different models of electronic goods such as digital cameras or plasma televisions. But when they get to the till, many spend freely on something they barely think about at all: an extended warranty, which is often more profitable to the retailer than the device it covers.

Shoppers typically pay 10-50% of the cost of a product to insure it beyond the term covered by the manufacturer's guarantee. The terms of these deals vary (and there is often a great deal of fine print), but they usually promise to repair or replace a faulty device for between one and four years. Yet products rarely break within the period covered, and repairs tend to cost no more than the warranty itself. That makes warranties amazingly profitable: they generate over $16 billion annually for American retailers, according to Warranty Week, a trade journal.

So why, asks a paper published in the December issue of the Journal of Consumer Research, do so many consumers still buy extended warranties? The authors—Tao Chen of the University of Maryland, Ajay Kalra of Rice University and Baohong Sun of Carnegie Mellon University—examined purchase data from a big electronics retailer for over 600 households from November 2003 to October 2004. They concluded that the decision to buy a warranty had a great deal to do with a shopper's mood.

If a customer is about to buy something fun (ie, a plasma television rather than a vacuum cleaner), he will be more inclined to splash out on extra insurance. This is because consumers value “hedonic” items over utilitarian ones, regardless of the actual price tag. This is especially true if the item is on sale, as finding an unexpected bargain leaves buyers feeling flush and pleased. The study also found that poorer consumers are more likely to buy “potentially unnecessary and overpriced insurance”, because they are more worried about the expense of replacing a product if it breaks.

The popularity of warranties should logically depend on the likelihood of a product's failure, says Mr Kalra. But although most policies go unused, he admits that the emotional tranquillity that comes with buying a new warranty is not in itself without value, even if “rationally, it doesn't make sense”.