OPTIMAL PRICE AND RELEASE TIME OF A SOFTWARE UNDER WARRANTY

The time of domination has ended. Competition is "in". To get prolonged huge profit in highly competitive markets, firms need some effective tools and techniques. An instrument for competitive advantage in such prevailing cut throat environment is product differentiation. The general differentiation factors can be the product or service offerings through the value added services or offerings through product extensions and one of the most important differentiating factors amongst all is product warranty. Warranty is seller assurance to a buyer that a product will carry out as stated and this promise works as a confidence for the buyer in purchasing the product. But servicing a warranty engages additional costs to the manufacturer and this has an effect on the profit levels. Warranty cost may be reduced by providing higher reliable product. The conflict existing in the context of software reliability, warranty period and selling price need to be considered jointly. In this paper, we develop an optimization model to determine the optimal price, time to stop testing under a given warranty period with constraint on reliability and sales of the software product so as to maximize the profit. Numerical examples have been done to illustrate the proposed model.