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Optimal Price and Warranty Length for Profit Determination: An Evaluation Based on Preventive Maintenance

In: Quality, IT and Business Operations

Author

Listed:
  • Adarsh Anand

    (University of Delhi)

  • Shakshi Singhal

    (University of Delhi)

  • Saurabh Panwar

    (University of Delhi)

  • Ompal Singh

    (University of Delhi)

Abstract

Warranty is a two-sided coin: on one hand, it results in additional cost to the producer, and on the other hand, it acts as a protectional tool for buyers. To deal with this additional cost (cost of repairing faulty items), preventive maintenance during the warranty period often plays a helping hand to the manufacturer. The role of preventive maintenance is therefore important, as it slows down the rate of system degradation. In view of this, the current study presents an analytical approach to determine the optimal profit for the firm, where sales price and warranty length act as key decision variables under the impact of preventive maintenance provided by the firm. The two-dimensional innovation diffusion model has been utilized to estimate the sales, and Weibull distribution has been used to represent the lifetime distribution of the product. To validate the accuracy of the proposed framework, numerical illustration has been provided for analysis done on real-life sales data set.

Suggested Citation

  • Adarsh Anand & Shakshi Singhal & Saurabh Panwar & Ompal Singh, 2018. "Optimal Price and Warranty Length for Profit Determination: An Evaluation Based on Preventive Maintenance," Springer Proceedings in Business and Economics, in: P.K. Kapur & Uday Kumar & Ajit Kumar Verma (ed.), Quality, IT and Business Operations, pages 265-277, Springer.
    • Handle: RePEc:spr:prbchp:978-981-10-5577-5_21
    DOI: 10.1007/978-981-10-5577-5_21
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    Cited by:

    1. Anshu Dai & Guanzhou Wei & Zhaomin Zhang & Shuguang He, 2020. "Design of a flexible preventive maintenance strategy for two-dimensional warranted products," Journal of Risk and Reliability, , vol. 234(1), pages 74-87, February.
    2. Tong Peng & Liu Chunling, 2020. "Designing differential service strategy for two-dimensional warranty based on warranty claim data under consumer-side modularisation," Journal of Risk and Reliability, , vol. 234(3), pages 550-561, June.

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