An exercise in probability theory

Assume there is a computer manufacturer whose warranty and service plans for a computer selling for $1,739 are priced as follows:

  • 4Yr — $340 or $10/month
  • 3Yr — $260 or $7/month
  • 2Yr — $170 or $5/month
  • 1Yr — $70 or $2/month

All plans include in-home service, parts, labor, and 24×7 phone support (meaning, coverage levels are identical).

Question: what can you infer about the computer’s reliability (as perceived by the manufacturer) from these prices?

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