Abstract: Multi-period release is a widely adopted practice followed by software providers to cope with the uncertain customers' requirements. In order to examine the impact of the requirement uncertainty on software providers' decisions, a two-period framework is considered with a monopoly software firm releasing software products to heterogeneous customers. The monopolist releases the initial product with lower quality in the first period, making the uncertain requirements more specific through the interaction between the customers and the initial product. In the second period, the monopolist releases the upgrading product to meet those requirements. The monopolist's decisions as an optimization model impacted by requirements uncertainty are formulated, taking the quality of initial product and the prices of initial and upgrading product as decision variables. The numerical results illustrate that, both the optimal quality of the initial product and the optimal prices of the initial and upgrading products decrease in the requirements uncertainty. In addition, it is optimal for the monopolist not to release the initial product in the first period when the market satisfies following conditions simultaneously: Firstly, the uncertainty of customers' requirements is sufficiently high, and secondly, the intensity of the negative word-of-mouth effect is higher than that of positive word-of-mouth effect. Some supports are offered in our work to the optimal decisions in the context when the information goods providers can not capture correct requirements of the customers.

Key words: customers' requirements uncertainty, multi-period release, word-fo-mouth effect, software quality design, software pricing