Pricing of full-service repair contracts

Sebastian Huber and Stefan Spinler

European Journal of Operational Research, 2012, vol. 222, issue 1, 113-121

Abstract: Full-service repair contracts are becoming increasingly popular, especially as an add-on to leasing contracts for technical investment products. This paper presents a model for pricing full-service repair contracts in the presence of risk-averse customers. The model identifies the optimal portfolio of full-service contracts and on-call service agreements to be offered by the service provider. The optimal full-service price is established, with failure arrivals being modeled as Poisson events and the cost of individual failures being stochastic. An existing on-call service business represents the price benchmark. The model is readily applicable for any service provider for small investment products such as special-purpose trucks or printing equipment.

Keywords: Service contracts; Contract pricing; Risk management; Mean–variance customer utility (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:222:y:2012:i:1:p:113-121

DOI: 10.1016/j.ejor.2012.04.012

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