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Cost analysis of warranty policies

Author

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  • D. G. Nguyen
  • D. N. P. Murthy

Abstract

This article analyzes two general warranty policies involving an initial free replacement period, followed by a pro rata period. We examine the short‐run total costs and longrun average costs under these policies. Formulas for both consumer costs and manufacturer profits under warranty are derived. We also study the expected number of purchases over the product life cycle under both policies. Bounds for the expected total costs and expected number of purchases are obtained for the case where the failure distribution of the item is new better than used.

Suggested Citation

  • D. G. Nguyen & D. N. P. Murthy, 1984. "Cost analysis of warranty policies," Naval Research Logistics Quarterly, John Wiley & Sons, vol. 31(4), pages 525-541, December.
    • Handle: RePEc:wly:navlog:v:31:y:1984:i:4:p:525-541
    DOI: 10.1002/nav.3800310403
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    Cited by:

    1. Shau‐Shiang Ja & Vidyadhar G. Kulkarni & Amitava Mitra & Jayprakash G. Patankar, 2002. "Warranty reserves for nonstationary sales processes," Naval Research Logistics (NRL), John Wiley & Sons, vol. 49(5), pages 499-513, August.
    2. Y. Sarada & R. Shenbagam, 2022. "Approximations of availability function using phase type distribution," OPSEARCH, Springer;Operational Research Society of India, vol. 59(4), pages 1337-1351, December.
    3. Jie Mi, 1999. "Comparisons of renewable warranties," Naval Research Logistics (NRL), John Wiley & Sons, vol. 46(1), pages 91-106, February.
    4. Edward P. C. Kao & Marion Spokony Smith, 1992. "On excess‐, current‐, and total‐life distributions of phase‐type renewal processes," Naval Research Logistics (NRL), John Wiley & Sons, vol. 39(6), pages 789-799, October.
    5. Marcel F. Neuts, 1988. "Computation and applications of geometric mixtures of convolutions," Naval Research Logistics (NRL), John Wiley & Sons, vol. 35(4), pages 529-537, August.

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