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A flexible extended warranty and related optimal strategies

Author

Listed:
  • N Jack

    (University of Abertay)

  • D N P Murthy

    (University of Queensland)

Abstract

The choice of extended warranties (EWs) currently available to consumers is extremely limited. Their EW purchase decisions have to be made at or very close to the time that they purchase the products and, at this point, they are uncertain about item reliability, future operating costs, and usage time before replacement. In this paper, we discuss an EW that offers more flexibility and we investigate optimal pricing strategies for the EW provider and optimal maintenance and replacement strategies for the consumer.

Suggested Citation

  • N Jack & D N P Murthy, 2007. "A flexible extended warranty and related optimal strategies," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 58(12), pages 1612-1620, December.
    • Handle: RePEc:pal:jorsoc:v:58:y:2007:i:12:d:10.1057_palgrave.jors.2602326
    DOI: 10.1057/palgrave.jors.2602326
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    References listed on IDEAS

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    1. 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.
    2. repec:bla:jemstr:v:4:y:1995:i:1:p:33-53:a is not listed on IDEAS
    3. Lam, Yeh & Kwok Wai Lam, Peggo, 2001. "An extended warranty policy with options open to consumers," European Journal of Operational Research, Elsevier, vol. 131(3), pages 514-529, June.
    4. Lutz, Nancy A. & Padmanabhan, V., 1998. "Warranties, extended warranties, and product quality," International Journal of Industrial Organization, Elsevier, vol. 16(4), pages 463-493, July.
    5. Padmanabhan, V, 1995. "Usage Heterogeneity and Extended Warranties," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(1), pages 33-53, Spring.
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    Citations

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    Cited by:

    1. Huang, Yeu-Shiang & Huang, Chao-Da & Ho, Jyh-Wen, 2017. "A customized two-dimensional extended warranty with preventive maintenance," European Journal of Operational Research, Elsevier, vol. 257(3), pages 971-978.
    2. Wang, Xiaolin & Zhao, Xiujie & Liu, Bin, 2020. "Design and pricing of extended warranty menus based on the multinomial logit choice model," European Journal of Operational Research, Elsevier, vol. 287(1), pages 237-250.
    3. Shafiee, Mahmood & Chukova, Stefanka, 2013. "Maintenance models in warranty: A literature review," European Journal of Operational Research, Elsevier, vol. 229(3), pages 561-572.
    4. Guillermo Gallego & Ruxian Wang & Ming Hu & Julie Ward & Jose Luis Beltran, 2015. "No Claim? Your Gain: Design of Residual Value Extended Warranties Under Risk Aversion and Strategic Claim Behavior," Manufacturing & Service Operations Management, INFORMS, vol. 17(1), pages 87-100, February.
    5. Bian, Yiwen & Xie, Jiazheng & Archibald, Thomas W. & Sun, Yanhong, 2019. "Optimal extended warranty strategy: Offering trade-in service or not?," European Journal of Operational Research, Elsevier, vol. 278(1), pages 240-254.
    6. Christina Aperjis & Filippo Balestrieri, 2017. "Loss aversion leading to advantageous selection," Journal of Risk and Uncertainty, Springer, vol. 55(2), pages 203-227, December.
    7. Lianmin Zhang & Lei Guan & Daniel Zhuoyu Long & Houcai Shen & Huajun Tang, 2023. "Who is better off by selling extended warranties in the supply chain: the manufacturer, the retailer, or both?," Annals of Operations Research, Springer, vol. 328(2), pages 1557-1583, September.
    8. Huang, Yeu-Shiang & Ho, Jyh-Wen & Hung, Jin-Wei & Tseng, Tzu-Liang (Bill), 2021. "A customized warranty model by considering multi-usage levels for the leasing industry," Reliability Engineering and System Safety, Elsevier, vol. 215(C).
    9. Wu, Shaomin & Longhurst, Phil, 2011. "Optimising age-replacement and extended non-renewing warranty policies in lifecycle costing," International Journal of Production Economics, Elsevier, vol. 130(2), pages 262-267, April.
    10. Dai, Anshu & Wei, Guanzhou & Wang, Dongfan & He, Zhen & He, Shuguang, 2021. "The opportunity study of PM strategy for second-hand products sold with a two-dimensional warranty," Reliability Engineering and System Safety, Elsevier, vol. 214(C).
    11. Afsahi, Mohsen & Shafiee, Mahmood, 2020. "A stochastic simulation-optimization model for base-warranty and extended-warranty decision-making of under- and out-of-warranty products," Reliability Engineering and System Safety, Elsevier, vol. 197(C).

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