Designing and pricing of two-dimensional extended warranty contracts based on usage rate

Tong, Peng; Liu, Zixian; Men, Feng; Cao, Lisi

doi:10.1080/00207543.2014.940073

Cited by 65 publications

(38 citation statements)

References 41 publications

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“…They show that by offering multiple contracts a service provider can dramatically increase its profit. Tong et al (2014) discuss the pricing strategies for a provider of two-dimensional warranty contracts. Esmaeili et al (2014) study the choices of various attributes in a three-level warranty service contract among a manufacturer, a service provider and a customer.…”

Section: Literature Reviewmentioning

confidence: 99%

Optimal design of uptime-guarantee contracts under IGFR valuations and convex costs

Hezarkhani

2017

European Journal of Operational Research

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An uptime-guarantee contract commits a service provider to maintain the functionality of a customer's equipment at least for certain fraction of working time during a contracted period. This paper addresses the optimal design of uptime-guarantee contracts for the service provider when the customer's valuation of a contract with a given guaranteed uptime level has an Increasing Generalized Failure Rate (IGFR) distribution. We first consider the case where the service provider proposes only one contract and characterize the optimal contract in terms of price as well as guaranteed uptime level assuming that the service provider's cost function is convex. In the second part, the case where the service provider offers a menu of contracts is considered. Given the guaranteed uptime levels of different contracts in the menu, we calculate the corresponding optimal prices. We also give the necessary and sufficient conditions for the existence of optimal contract menus with positive expected profits.

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Section: Literature Reviewmentioning

confidence: 99%

Optimal design of uptime-guarantee contracts under IGFR valuations and convex costs

Hezarkhani

2017

European Journal of Operational Research

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“…Shahanaghi et al [30] suggested a fixed extended 2-D warranty region on top of the base warranty, under which the optimal maintenance policy that minimizes a manufacturer's servicing cost was derived. Optimal pricing of this extended warranty was studied by Tong et al [32]. However, considering the different usage behaviors, offering a fixed extended 2-D warranty may not be attractive to most customers.…”

Section: Introductionmentioning

confidence: 98%

Warranty menu design for a two-dimensional warranty

Murthy

2016

Reliability Engineering & System Safety

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a b s t r a c tFierce competitions in the commercial product market have forced manufacturers to provide customerfriendly 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 twodimensional 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 staircase 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 stepstair warranty policy and the iso-probability of failure warranty policy that were extensively discussed in the literature.

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“…Although warranty service satisfies the needs of consumers and facilitates the market expansion of manufacturers, such service also introduces additional warranty cost burden. Data from a previous studies have shown that automobile manufacturers bear over 25 billion dollars warranty cost in the United States (Tong et al 2014) [29].…”

Section: Introductionmentioning

confidence: 99%

Design of differentiated warranty coverage that considers usage rate and service option of consumers under 2D warranty policy

Tong¹,

Ma²

2021

JIMO

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Warranty service providers usually provide homogeneous warranty service to improve consumer satisfaction and market share. Considering the difference of consumers, some scholars have carried out studies on maintenance strategies, service pricing, payment method, claim behaviour and warranty cost analysis in recent years. However, few scholars have focused on the differentiated coverage of warranty service that considers usage rate and service option of consumers. On the basis of previous classification criteria on usage rate, this paper divides consumers into heavy, medium and light usage rate groups with clear boundaries. To avoid discrimination in warranty service, this study divides 2D warranty coverage into disjoint sub-regions and adopts different maintenance modes in each sub-region. By formulating and calculating warranty cost model under warranty cost constraints, we can obtain the maximum warranty coverage under usage rate r. Therefore, differentiated warranty scope for consumers in the three groups can be proposed, whilst consumers can choose the most suitable warranty service according to their usage rate. Evidently, the proposed warranty strategy can provide flexible warranty service for consumers, meet the requirements of the warranty cost constraints of warranty service providers and enable enterprises to occupy a favourable position in the market competition.2010 Mathematics Subject Classification. Primary: 90B50; Secondary: 90B25.

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Designing and pricing of two-dimensional extended warranty contracts based on usage rate

Cited by 65 publications

References 41 publications

Optimal design of uptime-guarantee contracts under IGFR valuations and convex costs

Optimal design of uptime-guarantee contracts under IGFR valuations and convex costs

Warranty menu design for a two-dimensional warranty

Design of differentiated warranty coverage that considers usage rate and service option of consumers under 2D warranty policy

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