Optimal Price and Warranty Length for Profit Determination: An Evaluation Based on Preventive Maintenance

Adarsh Anand (), Shakshi Singhal (), Saurabh Panwar () and Ompal Singh ()
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Adarsh Anand: University of Delhi
Shakshi Singhal: University of Delhi
Saurabh Panwar: University of Delhi
Ompal Singh: University of Delhi

A chapter in Quality, IT and Business Operations, 2018, pp 265-277 from Springer

Abstract: Abstract Warranty is a two-sided coin: on one hand, it results in additional cost to the producer, and on the other hand, it acts as a protectional tool for buyers. To deal with this additional cost (cost of repairing faulty items), preventive maintenance during the warranty period often plays a helping hand to the manufacturer. The role of preventive maintenance is therefore important, as it slows down the rate of system degradation. In view of this, the current study presents an analytical approach to determine the optimal profit for the firm, where sales price and warranty length act as key decision variables under the impact of preventive maintenance provided by the firm. The two-dimensional innovation diffusion model has been utilized to estimate the sales, and Weibull distribution has been used to represent the lifetime distribution of the product. To validate the accuracy of the proposed framework, numerical illustration has been provided for analysis done on real-life sales data set.

Keywords: Preventive maintenance; Two-dimensional innovation diffusion model; Warranty (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/978-981-10-5577-5_21

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