ON TWO TYPES OF WARRANTIES: WARRANTY OF MALFUNCTIONING AND WARRANTY OF MISINFORMING

Dimitar Christozov (), Stefanka Chukova () and Plamen Mateev ()
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Dimitar Christozov: Department of Computer Science, American University in Bulgaria, Blagoevgrad, Bulgaria
Stefanka Chukova: School of Mathematics, Statistics and Computer Science, Victoria University of Wellington, Wellington, New Zealand
Plamen Mateev: Department of Mathematics and Informatics, University of Sofia "St. Kliment Ohridski", Sofia, Bulgaria

Asia-Pacific Journal of Operational Research (APJOR), 2009, vol. 26, issue 03, 399-420

Abstract: In this paper we focus on two types of risks, the risk of malfunctioning of a product quantified by its reliability, and the risk of misunderstanding the features and qualities of a product while deciding whether to buy it. The later risk is caused by the information asymmetry, which is a natural property of any communication process. We discuss the relationship between these risks and product warranty. We begin with an overview of warranties from the decision-makers' viewpoint. We elaborate on the purposes, legalities, and types of warranties and follow with a summary of mathematical models and concepts for quantifying the financial implications of warranties of malfunctioning. Further, we propose a model for quantifying the risk of misinforming and elaborate on the relationship between this risk and product warranty.

Date: 2009
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DOI: 10.1142/S0217595909002274

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