Optimising extended warranty policies following the two-dimensional warranty with repair time threshold

Abstract

This paper considers an optimal extended warranty policies after the expiration of base two-dimensional warranty with repair time threshold. During the base two-dimensional warranty period, each failure of the equipment can be either replaced or minimally repaired depending on a pre-specified repair time threshold. After the base warranty expires, the length of an extended warranty policy is available for selection. The equipment is minimally repaired on each failure during the extended warranty. In this study, the length of the extended warranty period is optimized by minimizing the expected cost rate incurred over the whole warranty coverage, from the views of customs and manufacturers respectively. For the purpose of illustration, we present and discuss some numerical examples. The effect of repair time threshold on the optimal strategy is also investigated numerically.