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Pricing of full-service repair contracts

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  • Huber, Sebastian
  • Spinler, Stefan

Abstract

Full-service repair contracts are becoming increasingly popular, especially as an add-on to leasing contracts for technical investment products. This paper presents a model for pricing full-service repair contracts in the presence of risk-averse customers. The model identifies the optimal portfolio of full-service contracts and on-call service agreements to be offered by the service provider. The optimal full-service price is established, with failure arrivals being modeled as Poisson events and the cost of individual failures being stochastic. An existing on-call service business represents the price benchmark. The model is readily applicable for any service provider for small investment products such as special-purpose trucks or printing equipment.

Suggested Citation

  • Huber, Sebastian & Spinler, Stefan, 2012. "Pricing of full-service repair contracts," European Journal of Operational Research, Elsevier, vol. 222(1), pages 113-121.
    • Handle: RePEc:eee:ejores:v:222:y:2012:i:1:p:113-121
    DOI: 10.1016/j.ejor.2012.04.012
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    Cited by:

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    2. Sabbaghi, Mostafa & Cade, Willie & Behdad, Sara & Bisantz, Ann M., 2017. "The current status of the consumer electronics repair industry in the U.S.: A survey-based study," Resources, Conservation & Recycling, Elsevier, vol. 116(C), pages 137-151.
    3. Deprez, Laurens & Antonio, Katrien & Boute, Robert, 2023. "Empirical risk assessment of maintenance costs under full-service contracts," European Journal of Operational Research, Elsevier, vol. 304(2), pages 476-493.
    4. Aly Owida & P.J. Byrne & Cathal Heavey & Paul Blake & Khaled S. El-Kilany, 2016. "A simulation based continuous improvement approach for manufacturing based field repair service contracting," International Journal of Production Research, Taylor & Francis Journals, vol. 54(21), pages 6458-6477, November.
    5. Deprez, Laurens & Antonio, Katrien & Boute, Robert, 2021. "Pricing service maintenance contracts using predictive analytics," European Journal of Operational Research, Elsevier, vol. 290(2), pages 530-545.
    6. Jackson, Canek & Pascual, Rodrigo & Mac Cawley, Alejandro & Godoy, Sergio, 2023. "Product–service system negotiation in aircraft lease contracts with option of disagreement," Journal of Air Transport Management, Elsevier, vol. 107(C).
    7. Hezarkhani, Behzad, 2017. "Optimal design of uptime-guarantee contracts under IGFR valuations and convex costs," European Journal of Operational Research, Elsevier, vol. 256(2), pages 556-566.
    8. Jackson, Canek & Pascual, Rodrigo, 2021. "Joint pricing and maintenance strategies in availability-based product-service systems under different overhaul conditions," Reliability Engineering and System Safety, Elsevier, vol. 216(C).
    9. Wang, Yulan & Wallace, Stein W. & Shen, Bin & Choi, Tsan-Ming, 2015. "Service supply chain management: A review of operational models," European Journal of Operational Research, Elsevier, vol. 247(3), pages 685-698.
    10. Miller, Michael & Mattes, Katharina, 2014. "Demonstration of a multi-criteria based decision support framework for selecting PSS to increase resource efficiency," Working Papers "Sustainability and Innovation" S11/2014, Fraunhofer Institute for Systems and Innovation Research (ISI).

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