Optimal strategies for price-warranty decision model of software product with dynamic production cost

The decision of selecting the right product from market is getting tedious these days from customers point of view, as firms offering product at low cost do not provide the assurance that the product will work as desired by the consumer whereas companies providing good quality products sell their product at relatively high prices. As a customer, a person looks around for a product which is low in price and high in quality at the same time. On that account, before buying customer is in a quest for a product which offers the perfect balance between the price and quality. Warranty acts as an important attribute of product quality comprehension. Warranty is an assurance from the firm that the product will work as desired by the customer at least for a period specified by the firm, which is called as warranty period. In this period, if the product does not meet the expectations of the customer, firm takes the responsibility of error fixation and remedial expenses. Now from firm´s point of view, providing this kind of balance between price and warranty to customers in the existing state of market is not an easy affair. Providing highly reliable product entails time and cost which increases the product price thus hampering the willingness of the customer to buy that product, which in turn pulls down profit levels of the associated firm. Also if low quality product is sold with a considerable warranty period then service charges will deter the objective of firm. So, in order to gain an upright position in the market, firms frequently revise their decision to release the product for different price and warranty. This paper fosters a dynamic decision model for the sales of software product to determine the optimal profit under the influence of price and warranty. It presents an optimization policy while considering the dynamic nature of production cost function and illustrates it with a numerical example. It also put forward the nature of the future profit and its effect on- proposed model taking price and warranty as dynamic attributes. Conclusions limitations and future direction are also discussed toward the end of the paper.