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Calculating the Reserve for a Time and Usage Indexed Warranty

Author

Listed:
  • Jehoshua Eliashberg

    (Marketing Department, The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

  • Nozer D. Singpurwalla

    (Department of Operations Research, The George Washington University, Washington, DC 20052)

  • Simon P. Wilson

    (Department of Statistics, University of Dublin, Trinity College, Ireland)

Abstract

Many products carry a warranty that offers protection for the consumer against low quality. These warranties are often two dimensional, such as an automobile warranty that guarantees repair up to a certain time and mileage after sale. This paper considers the problem of assessing the size of a reserve needed by the manufacturer to meet future claims for such a two-dimensional warranty. To do this, a class of failure models that describe failure by two scales---time and mileage, for example---must be developed. The first half of the paper is devoted to this development. Then the warranty reserve problem is considered in more detail. The problem is described and a decision-theoretic solution, making use of the newly developed reliability model, is proposed.

Suggested Citation

  • Jehoshua Eliashberg & Nozer D. Singpurwalla & Simon P. Wilson, 1997. "Calculating the Reserve for a Time and Usage Indexed Warranty," Management Science, INFORMS, vol. 43(7), pages 966-975, July.
    • Handle: RePEc:inm:ormnsc:v:43:y:1997:i:7:p:966-975
    DOI: 10.1287/mnsc.43.7.966
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    Citations

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    Cited by:

    1. Peng, Shizhe & Jiang, Wei & Huang, Wenpo & Luo, Qinglin, 2024. "The impact of gamma usage processes on preventive maintenance policies under two-dimensional warranty," Reliability Engineering and System Safety, Elsevier, vol. 242(C).
    2. Wu, Shaomin, 2013. "A review on coarse warranty data and analysis," Reliability Engineering and System Safety, Elsevier, vol. 114(C), pages 1-11.
    3. Jung, M. & Bai, D.S., 2007. "Analysis of field data under two-dimensional warranty," Reliability Engineering and System Safety, Elsevier, vol. 92(2), pages 135-143.
    4. Mitra, Amitava, 2021. "Warranty parameters for extended two-dimensional warranties incorporating consumer preferences," European Journal of Operational Research, Elsevier, vol. 291(2), pages 525-535.
    5. Xiaolin Wang & Wei Xie, 2018. "Two-dimensional warranty: A literature review," Journal of Risk and Reliability, , vol. 232(3), pages 284-307, June.
    6. Cheng, Julian Ming-Sung & Wang, Edward Shih-Tse & Lin, Julia Ying-Chao & Chen, Lily S.L. & Huang, Wen Hsien, 2008. "Do extrinsic cues affect purchase risk at international e-tailers: The mediating effect of perceived e-tailer service quality," Journal of Retailing and Consumer Services, Elsevier, vol. 15(5), pages 420-428.
    7. Cao, Zixia, 2022. "Brand equity, warranty costs, and firm value," International Journal of Research in Marketing, Elsevier, vol. 39(4), pages 1166-1185.
    8. Insua, David Rios & Ruggeri, Fabrizio & Soyer, Refik & Wilson, Simon, 2020. "Advances in Bayesian decision making in reliability," European Journal of Operational Research, Elsevier, vol. 282(1), pages 1-18.
    9. Peng, Shizhe & Jiang, Wei & Wei, Lai & Wang, Xiao-Lin, 2022. "A new cost-sharing preventive maintenance program under two-dimensional warranty," International Journal of Production Economics, Elsevier, vol. 254(C).
    10. Murthy, D. N. P. & Djamaludin, I., 2002. "New product warranty: A literature review," International Journal of Production Economics, Elsevier, vol. 79(3), pages 231-260, October.
    11. Huang, Yeu-Shiang & Gau, Wei-Yo & Ho, Jyh-Wen, 2015. "Cost analysis of two-dimensional warranty for products with periodic preventive maintenance," Reliability Engineering and System Safety, Elsevier, vol. 134(C), pages 51-58.
    12. Lu, Zhen & Shang, Jennifer, 2019. "Warranty mechanism for pre-owned tech products: Collaboration between E-tailers and online warranty provider," International Journal of Production Economics, Elsevier, vol. 211(C), pages 119-131.
    13. Yera, Yoel G. & Lillo, Rosa E. & Nielsen, Bo F. & Ramírez-Cobo, Pepa & Ruggeri, Fabrizio, 2021. "A bivariate two-state Markov modulated Poisson process for failure modeling," Reliability Engineering and System Safety, Elsevier, vol. 208(C).

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