Dynamic Pricing and warranty Length optimization in product s life cycle (A Case study in SANAM Electronic Company)

Warranty is an important element of new products’ marketing. It is obvious that longer warranty length has direct effect on product’s demand, but it can increase manufacturer's costs. The problem of this paper is maximizing the profit of the manufacturer, which consists of a set of revenue and cost elements. Although, most of researches in warranty area just examine the decisions for under-warranty products, in this research we proposed a model considering the role of both under- and out-of-warranty products on manufacturer’s profit. For this, we propose a model for calculating the number of under-warranty and out-of-warranty failures in each spare part production period. The demand itself is dependent upon the time, sales price, and length of warranty. Sales price and warranty length are, respectively, inversely and directly proportional to the market demand. Therefore, the simultaneous decision about sales price and length of warranty is of considerable significance in order to maximize the profit. We solve the problem with the Particle Swarm Optimization and Optics Inspired Optimization algorithms. Through a systematic analysis and comparison, some interesting and valuable managerial insights are derived which are applicable for companies such as SANAM Electronic Company for which we test our proposed model