Bear with me here, because mathematically this upgrade question is not as simple as it would seem. Why? Because Sears uses a 40% markup. If the Craftsman screwdrivers cost $1 each, they sell them for $1.40 and make $0.40 profit. If the higher priced screwdrivers cost $2 each they sell them for $2.80 and make $0.80 profit. OK?
When you bring back a broken Craftsman screwdriver and get a replacement, it basically costs Sears $1. (their cost). They have already made their $.40 profit and they turn the broken screwdriver back in to the manufacturer and get $1 credit. Sears breaks even with the manufacturer and makes their profit.
When you go for an upgrade here is what happens: First, you get $1.40 toward the upgrade, because that was the selling price you paid for the broken Craftsman screwdriver. Then you pay the additional $1.40 for the upgraded screwdriver. So there is $2.80 and you think you are even and Sears should like it.
Here is why they don't: So far, Sears has made $1.40, on the upgrade. Don't forget, though, they still get the $1. credit from the manufacturer on the broken Craftsman screwdriver. So, in this case of an upgrade they end up with a grand total of $2.40! But, they sell the better screwdriver for $2.80, so, what happened to their other $0.40 they should have made?
The answer is : YOU MADE IT!! It may not seem so, but effectively, YOU made their $0.40 profit when you received $1.40 credit on a tool they can buy for $1.00!!!
That equation goes against all sound business principles and is why they mathematically want to discourage giving an upgrade this way.
You may not like it, but it is how they should do business to stay in business,