An outcome-based maintenance contracting model by considering multi-criteria and risk equilibrium

Jong-Jang Lin, Yi-Kuei Lin (), Louis Cheng-Lu Yeng and Ruey-Huei Yeh
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Jong-Jang Lin: China University of Science and Technology
Yi-Kuei Lin: National Yang Ming Chiao Tung University
Louis Cheng-Lu Yeng: National Yang Ming Chiao Tung University
Ruey-Huei Yeh: National Taiwan University of Science and Technology

Annals of Operations Research, 2025, vol. 349, issue 1, No 4, 47-66

Abstract: Abstract In recent years, the system maintenance service has been transitioning from the resource-based contract (RBC) approach towards a new outcome-based contract (OBC) approach, enabling better profits for the service provider and lower cost and risk equilibrium for the service buyer. Prior studies usually focus on a single criterion as a service outcome for a complex and repairable system. This paper proposes a novel risk equilibrium OBC model with a given multi-outcome in maintenance service. The proposed model solves the multi-criteria obligation problem in a complex repairable system maintenance service to achieve three objectives: searching for a dominant risk equilibrium and inner cost, attaining the system's expected outcome, and controlling the multi-outcome and risk equilibrium. The proposed model can apply to disparate maintenance policies comprising various preventive and corrective maintenance methods. Furthermore, the proposed model presents a comparative mechanism to different contract types by game-theoretical analysis, which leads to a first-best solution and avoids moral hazard problems. The case study shows that the proposed OBC model forms a game-theoretical equilibrium for both parties, ensuring the risk equilibrium with the optimal cost.

Keywords: Outcome-based contract (OBC); Maintenance service; Maintenance policy portfolio; Multi-criteria; Risk equilibrium (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10479-023-05331-4

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