THE ODDS ARE WITH THE HOUSE. The fact that a store offers you an extended warranty for what looks like a small fee is evidence that they expect to profit by it. To what extent?

Neither Circuit City nor Best Buy discloses how much of its bottom line comes from extended warranty sales. But analysts have estimated that at least 50 percent and in some lean years 100 percent of profits at the electronics retailers come from extended warranty sales.

The full article (via Marginal Revolution) is a clinic in applied economics.