Optimal repair–replace strategies for a warranted product

When a repairable product is sold with a free replacement warranty, the manufacturer has the option of rectifying a failure by either repairing the failed item or replacing it with a new one. In this paper, repairs are assumed to be minimal in the sense that they leave the product in exactly the same condition it was in prior to failure. We discuss the form of the optimal repair–replace strategy that minimises the expected cost of servicing the warranty over the warranty period.