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Pricing and inventory policies for Hi-tech products under replacement warranty

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  • Yu-Chung Tsao
  • Wei-Guang Teng
  • Ruey-Shii Chen
  • Wang-Ying Chou

Abstract

Companies, especially in the Hi-tech (high-technology) industry (such as computer, communication and consumer electronic products), often provide a replacement warranty period for purchased items. In reality, simultaneously determining the price and inventory decisions under warranty policy is an important issue. The objective of this paper is to develop a joint pricing and inventory model for Hi-tech products under replacement warranty policy. In the first model, we consider a Hi-tech product feature in which the selling price is declining in a trend. We determine the optimal inventory level for each period and retail price for the first period while maximising the total profit. In the second model, we further determine the optimal retail price and inventory level for each period in the dynamic demand market. This study develops solution approaches to solve the problems described above. Numerical analysis discusses the influence of system parameters on the company's decisions and behaviours. The results of this study could serve as a reference for business managers or administrators.

Suggested Citation

  • Yu-Chung Tsao & Wei-Guang Teng & Ruey-Shii Chen & Wang-Ying Chou, 2014. "Pricing and inventory policies for Hi-tech products under replacement warranty," International Journal of Systems Science, Taylor & Francis Journals, vol. 45(6), pages 1255-1267, June.
    • Handle: RePEc:taf:tsysxx:v:45:y:2014:i:6:p:1255-1267
    DOI: 10.1080/00207721.2012.761454
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    Cited by:

    1. Fang, Chih-Chiang, 2020. "Optimal price and warranty decision for durable products in a competitive duopoly market," Reliability Engineering and System Safety, Elsevier, vol. 203(C).
    2. Udayan Chanda & Alok Kumar, 2019. "Optimization of EOQ Model for New Products Under Multi-Stage Adoption Process," International Journal of Innovation and Technology Management (IJITM), World Scientific Publishing Co. Pte. Ltd., vol. 16(02), pages 1-25, April.
    3. Wang, Dongfan & He, Zhen & He, Shuguang & Zhang, Zhaomin & Zhang, Yiwen, 2021. "Dynamic pricing of two-dimensional extended warranty considering the impacts of product price fluctuations and repair learning," Reliability Engineering and System Safety, Elsevier, vol. 210(C).
    4. 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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