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Research Note--Sell First, Fix Later: Impact of Patching on Software Quality

  • Ashish Arora

    ()

    (H. John Heinz III School of Public Policy and Management, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, Pennsylvania 15213)

  • Jonathan P. Caulkins

    ()

    (H. John Heinz III School of Public Policy and Management, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, Pennsylvania 15213)

  • Rahul Telang

    ()

    (H. John Heinz III School of Public Policy and Management, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, Pennsylvania 15213)

We present a model of fixing or patching a software problem after the product has been released in the market. Specifically, we model a software firm's trade-off in releasing a buggy product early and investments in fixing it later. Just as the marginal cost of producing software can be effectively zero, so can the marginal cost of repairing multiple copies of defective software by issuing patches. We show that due to the fixed cost nature of investments in patching, a software vendor has incentives to release a buggier product early and patch it later in a larger market. Thus, a software monopolist releases a product with fewer bugs but later than what is socially optimal. We contrast this result with physical good markets where market size does not play any role in quality provision. We also show that for comparable costs, a software monopolist releases the product with more bugs but invests more in post-patching support later than the physical good monopolist.

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File URL: http://dx.doi.org/10.1287/mnsc.1050.0440
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Article provided by INFORMS in its journal Management Science.

Volume (Year): 52 (2006)
Issue (Month): 3 (March)
Pages: 465-471

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Handle: RePEc:inm:ormnsc:v:52:y:2006:i:3:p:465-471
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  1. K. Sridhar Moorthy, 1988. "Product and Price Competition in a Duopoly," Marketing Science, INFORMS, vol. 7(2), pages 141-168.
  2. Kevin B. Hendricks & Vinod R. Singhal, 1997. "Delays in New Product Introductions and the Market Value of the Firm: The Consequences of Being Late to the Market," Management Science, INFORMS, vol. 43(4), pages 422-436, April.
  3. Gregg A. Jarrell & Sam Peltzman, 1984. "The Impact of Product Recalls on the Wealth of Sellers," University of Chicago - George G. Stigler Center for Study of Economy and State 33, Chicago - Center for Study of Economy and State.
  4. Rajiv D. Banker & Sandra A. Slaughter, 1997. "A Field Study of Scale Economies in Software Maintenance," Management Science, INFORMS, vol. 43(12), pages 1709-1725, December.
  5. Gary L. Lilien & Eunsang Yoon, 1990. "The Timing of Competitive Market Entry: An Exploratory Study of New Industrial Products," Management Science, INFORMS, vol. 36(5), pages 568-585, May.
  6. Morris A. Cohen & Jehoshua Eliasberg & Teck-Hua Ho, 1996. "New Product Development: The Performance and Time-to-Market Tradeoff," Management Science, INFORMS, vol. 42(2), pages 173-186, February.
  7. M. S. Krishnan & C. H. Kriebel & Sunder Kekre & Tridas Mukhopadhyay, 2000. "An Empirical Analysis of Productivity and Quality in Software Products," Management Science, INFORMS, vol. 46(6), pages 745-759, June.
  8. Billie Jo Zirger & Modesto A. Maidique, 1990. "A Model of New Product Development: An Empirical Test," Management Science, INFORMS, vol. 36(7), pages 867-883, July.
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