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An outcome-based maintenance contracting model by considering multi-criteria and risk equilibrium

Author

Listed:
  • Jong-Jang Lin

    (China University of Science and Technology)

  • Yi-Kuei Lin

    (National Yang Ming Chiao Tung University
    Chaoyang University of Technology
    China Medical University Hospital, China Medical University
    Asia University)

  • Louis Cheng-Lu Yeng

    (National Yang Ming Chiao Tung University)

  • Ruey-Huei Yeh

    (National Taiwan University of Science and Technology)

Abstract

In recent years, the system maintenance service has been transitioning from the resource-based contract (RBC) approach towards a new outcome-based contract (OBC) approach, enabling better profits for the service provider and lower cost and risk equilibrium for the service buyer. Prior studies usually focus on a single criterion as a service outcome for a complex and repairable system. This paper proposes a novel risk equilibrium OBC model with a given multi-outcome in maintenance service. The proposed model solves the multi-criteria obligation problem in a complex repairable system maintenance service to achieve three objectives: searching for a dominant risk equilibrium and inner cost, attaining the system's expected outcome, and controlling the multi-outcome and risk equilibrium. The proposed model can apply to disparate maintenance policies comprising various preventive and corrective maintenance methods. Furthermore, the proposed model presents a comparative mechanism to different contract types by game-theoretical analysis, which leads to a first-best solution and avoids moral hazard problems. The case study shows that the proposed OBC model forms a game-theoretical equilibrium for both parties, ensuring the risk equilibrium with the optimal cost.

Suggested Citation

  • Jong-Jang Lin & Yi-Kuei Lin & Louis Cheng-Lu Yeng & Ruey-Huei Yeh, 2025. "An outcome-based maintenance contracting model by considering multi-criteria and risk equilibrium," Annals of Operations Research, Springer, vol. 349(1), pages 47-66, June.
  • Handle: RePEc:spr:annopr:v:349:y:2025:i:1:d:10.1007_s10479-023-05331-4
    DOI: 10.1007/s10479-023-05331-4
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