IDEAS home Printed from https://ideas.repec.org/a/eee/oprepe/v14y2025ics2214716025000065.html
   My bibliography  Save this article

Pricing strategy of supply chain considering response time of extended warranty service

Author

Listed:
  • Zhou, Xingjian
  • Feng, Yan
  • Chen, Hongming
  • Cai, Lihua
  • Bashkarev, Vladimir

Abstract

Extended warranty services (EWS) offers avenues for new profit sources and growth opportunities. In a time-sensitive market, the response time has an important impact on the pricing of EWS and satisfying consumer utility. Applying Stakelberg Game theory, a two-echelon product-service supply chain consisting of a manufacturer and two retailers (Self-owned, Franchised) is construct. Considering the EWS response time and price to characterize the consumer utility function, the EWS pricing strategies in different market stages are studied based on the scenarios of identical response time (IRT) and different response time (DRT). The research shows that: (1) under IRT scenario, the optimal EWS pricing and cost of the self-owned and franchised retailers are negatively related to the response time, therefore, both retailers should consider a trade-off strategy between the EWS price and the response time; (2) under DRT scenario, an EWS response time threshold exists, based on which the self-owned and franchised retailers should develop the optimal EWS pricing strategies; (3) under DRT scenario, the retailers’ optimal EWS prices have a negative relationship with consumers’ price sensitivity coefficient, and a positive relationship with consumers’ time sensitivity coefficient. The manufacturer and the self-owned retailer can significantly reduce EWS response time with a limited increase in the prices. While the franchised retailer need to follow the self-owned retailer in developing its pricing strategy. The study construct a time-sensitive consumer utility function by integrating response time and pricing, more accurately portraying the expected value of EWS. Based on the market characteristics of EWS growth and maturity periods, the EWS pricing strategies are expanded regarding response time differentiation in multiple cycles. It helps companies better understand consumer demand for EWS, and assists them in formulating pricing strategies for different stages of EWS market development,and improving EWS supply chain management.

Suggested Citation

  • Zhou, Xingjian & Feng, Yan & Chen, Hongming & Cai, Lihua & Bashkarev, Vladimir, 2025. "Pricing strategy of supply chain considering response time of extended warranty service," Operations Research Perspectives, Elsevier, vol. 14(C).
    • Handle: RePEc:eee:oprepe:v:14:y:2025:i:c:s2214716025000065
    DOI: 10.1016/j.orp.2025.100330
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S2214716025000065
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.orp.2025.100330?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:oprepe:v:14:y:2025:i:c:s2214716025000065. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/operations-research-perspectives .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.