Abstract
Quality claims and quality in fact of financial and industrial products as well as financial and business services are essential to entice and attract customers. For these reasons, firms are often tempted to assert claims that might or might not be met. These claims have risks which cannot always be prevented when interpreted as a 'sure thing' while in fact, quality performance is probabilistic. This paper considers a financial (utility based) approach to pricing a quality claim. To do so, we assume that ex-ante, a true quality performance is defined by a density function while claims are advertised-setting expectations for a quality performance. On the basis of these assumptions we determine the price associated with such claims.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 342-347 |
| Number of pages | 6 |
| Journal | Applied Stochastic Models in Business and Industry |
| Volume | 27 |
| Issue number | 3 |
| DOIs | |
| State | Published - May 2011 |
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Keywords
- finance
- price
- quality
ASJC Scopus subject areas
- Business, Management and Accounting(all)
- Modeling and Simulation
- Management Science and Operations Research
Cite this
The price of quality claims. / Tapiero, Charles.
In: Applied Stochastic Models in Business and Industry, Vol. 27, No. 3, 05.2011, p. 342-347.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - The price of quality claims
AU - Tapiero, Charles
PY - 2011/5
Y1 - 2011/5
N2 - Quality claims and quality in fact of financial and industrial products as well as financial and business services are essential to entice and attract customers. For these reasons, firms are often tempted to assert claims that might or might not be met. These claims have risks which cannot always be prevented when interpreted as a 'sure thing' while in fact, quality performance is probabilistic. This paper considers a financial (utility based) approach to pricing a quality claim. To do so, we assume that ex-ante, a true quality performance is defined by a density function while claims are advertised-setting expectations for a quality performance. On the basis of these assumptions we determine the price associated with such claims.
AB - Quality claims and quality in fact of financial and industrial products as well as financial and business services are essential to entice and attract customers. For these reasons, firms are often tempted to assert claims that might or might not be met. These claims have risks which cannot always be prevented when interpreted as a 'sure thing' while in fact, quality performance is probabilistic. This paper considers a financial (utility based) approach to pricing a quality claim. To do so, we assume that ex-ante, a true quality performance is defined by a density function while claims are advertised-setting expectations for a quality performance. On the basis of these assumptions we determine the price associated with such claims.
KW - finance
KW - price
KW - quality
UR - http://www.scopus.com/inward/record.url?scp=79960012266&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=79960012266&partnerID=8YFLogxK
U2 - 10.1002/asmb.842
DO - 10.1002/asmb.842
M3 - Article
AN - SCOPUS:79960012266
VL - 27
SP - 342
EP - 347
JO - Applied Stochastic Models in Business and Industry
JF - Applied Stochastic Models in Business and Industry
SN - 1524-1904
IS - 3
ER -