Warranty of Misinforming as an Option in Product Utilization Process

Dimitar Grozdanov Christozov, Stefanka Chukova, Plamen S. Mateev
Informing Science: The International Journal of an Emerging Transdiscipline  •  Volume 19  •  2016  •  pp. 075-087
The following definition of “option” is given in Wikipedia - “In finance, an option is a contract, which gives the buyer (the owner or holder) the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price on or before a specified date, depending on the form of the option” (“Option,” n.d.). Option as a risk management (mitigation) tool is broadly used in finance and trade. At the same time, it introduces asymmetry in the sense that, probabilistically, it limits the level of losses (e.g., the price of the option) and allows for unlimited gains. In the market of sophisticated devices (as smart phones, tablets, etc.), where technologies are rapidly advancing, customers usually do not have the experience to use all features of the device at the time of the purchase. Due to the lack of appropriate expertise, the risk of misinforming, leading to not purchasing the “right” device is high, but given enough time to learn the capabilities of the device and map these to the needs and tasks that device will be used for, could provide the client with substantial long term benefits. Warranty of misinforming is a mechanism that provides the client with the opportunity to explore the device and master its features under limited risk of financial losses. Thus, the warranty of misinforming could be considered as an option - the custom-ers buy it (at a fixed cost) and may gain (theoretically) unlimited benefit by realizing (within the terms of the warranty) that the device can be used to solve a variety of problems not envisaged at the time of purchase. In this study we present the idea of treating the warranty of misinforming as an option in finances and provide examples to illustrate our viewpoint.
warranty of malfunctioning, warranty of misinforming, options, asymmetry, utility, risk of misinforming
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