Pro-Rata Warranty pricing model with risk-averse manufacturers Mahdi Nasrollahi
Author(s):
Article Type:
Research/Original Article (دارای رتبه معتبر)
Abstract:
Due to fierce competition and customer demand, manufacturers have started selling products with different warranty policies and pro-rata warranty is one of the most widely used warranty policy. In this paper we propose a warranty model for pro-rata, fixed period warranty policy with risk averse manufacturer that determines optimal warranty price under inflationary condition.
This model has been proposed for products with time dependent failure intensity with Non homogeneous Poissons process for failure intensity function, and concave utility function. Using the exponential utility function, the decision model is developed to maximize the manufacturers certainty profit equivalent. Risk preference model is developed to find the optimal warranty price through the use of the manufacturers utility function for profit. Finally, the sensitivity of the warranty price models is analyzed using numerical examples with respect to such factors as (1) the manufacturer's risk preferences, (2) product failure rate parameters, (3) warranty period length, and (4) inflation and discount rate.
This model has been proposed for products with time dependent failure intensity with Non homogeneous Poissons process for failure intensity function, and concave utility function. Using the exponential utility function, the decision model is developed to maximize the manufacturers certainty profit equivalent. Risk preference model is developed to find the optimal warranty price through the use of the manufacturers utility function for profit. Finally, the sensitivity of the warranty price models is analyzed using numerical examples with respect to such factors as (1) the manufacturer's risk preferences, (2) product failure rate parameters, (3) warranty period length, and (4) inflation and discount rate.
Keywords:
Language:
Persian
Published:
Journal of Industrial Management Studies, Volume:15 Issue: 45, 2017
Pages:
75 to 96
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