Warranty menu design for a two-dimensional warranty

Zhi-Sheng Ye and D.N. Pra Murthy

Reliability Engineering and System Safety, 2016, vol. 155, issue C, 21-29

Abstract: Fierce competitions in the commercial product market have forced manufacturers to provide customer-friendly warranties with a view to achieving higher customer satisfaction and increasing the market share. This study proposes a strategy that offers customers a two-dimensional warranty menu with a number of warranty choices, called a flexible warranty policy. We investigate the design of a flexible two-dimensional warranty policy that contains a number of rectangular regions. This warranty policy is obtained by dividing customers into several groups according to their use rates and providing each group a germane warranty region. Consumers choose a favorable one from the menu according to their usage behaviors. Evidently, this flexible warranty policy is attractive to users of different usage behaviors, and thus, it gives the manufacturer a good position in advertising the product. When consumers are unaware about their use rates upon purchase, we consider a fixed two-dimensional warranty policy with a stair-case warranty region and show that it is equivalent to the flexible policy. Such an equivalence reveals the inherent relationship between the rectangular warranty policy, the L-shape warranty policy, the step-stair warranty policy and the iso-probability of failure warranty policy that were extensively discussed in the literature.

Keywords: Flexible warranty policy; Stair-case warranty; Accelerated failure time model; Reliability (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reensy:v:155:y:2016:i:c:p:21-29

DOI: 10.1016/j.ress.2016.05.013

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