Academic journal article Informing Science: the International Journal of an Emerging Transdiscipline

Warranty of Misinforming as an Option in Product Utilization Process

Academic journal article Informing Science: the International Journal of an Emerging Transdiscipline

Warranty of Misinforming as an Option in Product Utilization Process

Article excerpt

Abstract

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 customers 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.

Keywords: warranty of malfunctioning, warranty of misinforming, options, asymmetry, utility, risk of misinforming.

"Trial and error is freedom."
        (Taleb, 2014, p. 246)

Introduction

The market of complex and technologically advanced devices is growing quickly, offering many challenges to all involved parties. The major challenge is that many new features are included in the next generation devices and these new devices show up on the market almost on a daily basis. This quick turnaround does not allow the customers to learn how to fully utilize the device's built-in features. Additionally, the smart devices allow an easy extension of their capabilities by adding a variety of on-line applications.

All of the above significantly affect the risk of misinforming. Usually, at the time of purchase, the seller is not familiar with the problems/tasks the costumer aims to solve with the device and therefore is not able to provide in depth advice. The customer has to gain experience in using the device and mapping its features to the problems/tasks s/he faces. Also, often it is difficult to realize that a newly encountered problem/task can be addressed by the same device as the customer was not aware of this possibility at the time of purchase and, of course, s/he had not included those in her/his purchasing motivation.

This shows that there might be also some positive outcomes of misinforming. The option of having positive effect of misinforming has not been emphasized in any earlier studies and definitely deserves some attention. When it comes to these positive outcomes, the information asymmetry between the seller and buyer is not critical for quantifying the risk of misinforming, and moreover the information asymmetry cannot be reduced by improving the communication process between these two parties. In addition, even clients' training would not necessarily reveal the hidden potential of the product and reduce the misinforming. The full benefit of the device for a particular client is usually understood, often by chance, via trials and errors and it is highly dependent on client's ability to adopt quickly the incoming technical advances for the device. …

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