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Calculating the Reserve for a Time and Usage Indexed Warranty

Author

Listed:
  • Jehoshua Eliashberg

    (Marketing Department, The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

  • Nozer D. Singpurwalla

    (Department of Operations Research, The George Washington University, Washington, DC 20052)

  • Simon P. Wilson

    (Department of Statistics, University of Dublin, Trinity College, Ireland)

Abstract

Many products carry a warranty that offers protection for the consumer against low quality. These warranties are often two dimensional, such as an automobile warranty that guarantees repair up to a certain time and mileage after sale. This paper considers the problem of assessing the size of a reserve needed by the manufacturer to meet future claims for such a two-dimensional warranty. To do this, a class of failure models that describe failure by two scales---time and mileage, for example---must be developed. The first half of the paper is devoted to this development. Then the warranty reserve problem is considered in more detail. The problem is described and a decision-theoretic solution, making use of the newly developed reliability model, is proposed.

Suggested Citation

  • Jehoshua Eliashberg & Nozer D. Singpurwalla & Simon P. Wilson, 1997. "Calculating the Reserve for a Time and Usage Indexed Warranty," Management Science, INFORMS, vol. 43(7), pages 966-975, July.
    • Handle: RePEc:inm:ormnsc:v:43:y:1997:i:7:p:966-975
    DOI: 10.1287/mnsc.43.7.966
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    Citations

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    Cited by:

    1. Wu, Shaomin, 2013. "A review on coarse warranty data and analysis," Reliability Engineering and System Safety, Elsevier, vol. 114(C), pages 1-11.
    2. Jung, M. & Bai, D.S., 2007. "Analysis of field data under two-dimensional warranty," Reliability Engineering and System Safety, Elsevier, vol. 92(2), pages 135-143.
    3. Mitra, Amitava, 2021. "Warranty parameters for extended two-dimensional warranties incorporating consumer preferences," European Journal of Operational Research, Elsevier, vol. 291(2), pages 525-535.
    4. Xiaolin Wang & Wei Xie, 2018. "Two-dimensional warranty: A literature review," Journal of Risk and Reliability, , vol. 232(3), pages 284-307, June.
    5. Cheng, Julian Ming-Sung & Wang, Edward Shih-Tse & Lin, Julia Ying-Chao & Chen, Lily S.L. & Huang, Wen Hsien, 2008. "Do extrinsic cues affect purchase risk at international e-tailers: The mediating effect of perceived e-tailer service quality," Journal of Retailing and Consumer Services, Elsevier, vol. 15(5), pages 420-428.
    6. Cao, Zixia, 2022. "Brand equity, warranty costs, and firm value," International Journal of Research in Marketing, Elsevier, vol. 39(4), pages 1166-1185.
    7. Insua, David Rios & Ruggeri, Fabrizio & Soyer, Refik & Wilson, Simon, 2020. "Advances in Bayesian decision making in reliability," European Journal of Operational Research, Elsevier, vol. 282(1), pages 1-18.
    8. Peng, Shizhe & Jiang, Wei & Wei, Lai & Wang, Xiao-Lin, 2022. "A new cost-sharing preventive maintenance program under two-dimensional warranty," International Journal of Production Economics, Elsevier, vol. 254(C).
    9. Murthy, D. N. P. & Djamaludin, I., 2002. "New product warranty: A literature review," International Journal of Production Economics, Elsevier, vol. 79(3), pages 231-260, October.
    10. Huang, Yeu-Shiang & Gau, Wei-Yo & Ho, Jyh-Wen, 2015. "Cost analysis of two-dimensional warranty for products with periodic preventive maintenance," Reliability Engineering and System Safety, Elsevier, vol. 134(C), pages 51-58.
    11. Lu, Zhen & Shang, Jennifer, 2019. "Warranty mechanism for pre-owned tech products: Collaboration between E-tailers and online warranty provider," International Journal of Production Economics, Elsevier, vol. 211(C), pages 119-131.
    12. Yera, Yoel G. & Lillo, Rosa E. & Nielsen, Bo F. & Ramírez-Cobo, Pepa & Ruggeri, Fabrizio, 2021. "A bivariate two-state Markov modulated Poisson process for failure modeling," Reliability Engineering and System Safety, Elsevier, vol. 208(C).

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