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“Free replacement extended warranty” or “traditional extended warranty”: Optimal extended warranty selection strategy

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  • Kaiying Cao
  • Yunyi Su
  • Yuqiu Xu
  • Jia Wang

Abstract

A variety of new extended warranty services are increasingly emerging nowadays, among which “free replacement extended warranty” service is favored by many consumers. Considering resource constraints and cannibalism, firms are facing the challenge of providing the “free replacement extended warranty” service (NR) or the “traditional extended warranty” service (EW). To meet this challenge, we develop theoretical models and optimize the models to obtain management implications. The results show that firms should choose the NR strategy when the traditional extended warranty cost coefficient is relatively high and the free replacement cost coefficient is relatively low. Otherwise, the EW strategy is better.

Suggested Citation

  • Kaiying Cao & Yunyi Su & Yuqiu Xu & Jia Wang, 2022. "“Free replacement extended warranty” or “traditional extended warranty”: Optimal extended warranty selection strategy," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(7), pages 3130-3146, October.
    • Handle: RePEc:wly:mgtdec:v:43:y:2022:i:7:p:3130-3146
    DOI: 10.1002/mde.3586
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    References listed on IDEAS

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    Cited by:

    1. Kaiying Cao & Yunyi Su & Guoxin Han & Jia Wang, 2023. "Optimal maintenance service outsourcing strategy considering extended warranty service," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 1344-1358, March.

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