An extended warranty policy with options open to consumers |
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| Institution: | 1. Lingnan (University) College, Zhongshan University, Guangzhou 510275, People''s Republic of China;2. Department of Statistics, The Chinese University of Hong Kong, Shatin, N.T., Hong Kong;3. Centre for Clinical Trials and Epidemiological Research, The Chinese University of Hong Kong, Hong Kong, People''s Republic of China;1. School of Industrial Engineering, Iran University of Science and Technology, University Road, Hengam Street, Resalat Square, Narmak, Tehran, Iran;2. Department of Industrial Engineering, Yazd University, Yazd 8915818411, Iran;1. School of Business Administration, Northeastern University, Shenyang, Liaoning 110819, China;2. Joseph M. Katz Graduate School of Business, University of Pittsburgh, Pittsburgh, PA 15260, USA;1. Industrial Engineering, Faculty of Industrial Engineering, Institut Teknologi Bandung, Jalan Ganesha 10, Bandung 40132, Indonesia;2. Doctoral Program in Industrial Engineering and Management, Faculty of Industrial Engineering, Institut Teknologi Bandung, Jalan Ganesha 10, Bandung 40132, Indonesia;3. Statistics Research Division, Faculty of Mathematics and Natural Sciences, Institut Teknologi Bandung, Jalan Ganesha 10, Bandung 40132, Indonesia;4. Industrial Engineering, Engineering Faculty, Langlangbuana University, Jalan Karapitan No.116, Bandung 40261, Indonesia |
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| 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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