An extended warranty policy with options open to consumers

An extended warranty policy with options open to consumers

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Article ID: iaor2002287
Country: Netherlands
Volume: 131
Issue: 3
Start Page Number: 514
End Page Number: 529
Publication Date: Jun 2001
Journal: European Journal of Operational Research
Authors: ,
Keywords: programming: dynamic
Abstract:

An extended warranty model that includes a free repair period and an extended warranty period will be discussed. Consumers have choices to renew or not to renew at the end of free repair period. Different choices will have different cost implications for consumers and manufacturers. The exact expressions of the total expected discounted cost, and the long-run average cost per unit time for a consumer and the manufacturer are derived. Then the optimal policies for the consumers are obtained. Under the assumption that a consumer has applied his/her optimal policy, an optimal policy or an ϵ-optimal policy for the manufacturer is then determined analytically.

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