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.
The problem of enhancing success in e-Commerce requires reducing or sharing the risk of misinforming. The objectives of this paper is to raise and discuss the difficulties in quantifying the risk of misunderstanding caused by information asymmetry in a communication process; and to propose a mathematical model, developed to measure the risk of misinforming. Usage of warranty, as the most popular tool of sharing risk, is discussed in the light of risks of misinforming. A data set collected in an experiment, was used to illustrate the major ideas proposed as well as to stress on the fact that in particular circumstances this kind of risk is not understood by clients, which often leads to wrong decisions.
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