Dynamic Cash Management of Warranty Reserves

Cigdem Gurgur

The Engineering Economist, 2011, vol. 56, issue 1, 1-27

Abstract: The objective in warranty reserve management is to cover contingent liabilities that arise from warranty obligations. Maintaining excess reserves would cause opportunity cost, whereas depleting the reserve would necessitate finding emergency funds. In this article we propose a policy rule to guide cash management of warranty reserves for an infinite horizon that involves periodic reviews. At the beginning of each period the decision maker determines how much to add to or subtract from the fund and how much to contribute after each sale. Numerical examples show how the optimal control variables change in response to change in problem parameters.

Date: 2011
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1080/0013791X.2010.548908 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:uteexx:v:56:y:2011:i:1:p:1-27

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/UTEE20

DOI: 10.1080/0013791X.2010.548908

Access Statistics for this article

The Engineering Economist is currently edited by Sarah Ryan

More articles in The Engineering Economist from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().