Design of Extended Warranties in Supply Chains under Additive Demand

View/ Open
Issue Date
2012Author
Li, Kumpeg
Mallik, Suman
Chhajed, Dilip
Publisher
Production and Operations Management Society
Type
Article
Article Version
Scholarly/refereed, author accepted manuscript
Metadata
Show full item recordAbstract
We study the design of extended warranties in a supply chain consisting of a manufacturer and an independent retailer. The manufacturer produces a single product and sells it exclusively through the retailer. The extended warranty can be offered either by the manufacturer or by the retailer. The party offering the extended warranty decides on the terms of the policy in its best interest and incurs the repair costs of product failures. We use game theoretic models to answer the following questions. Which scenario leads to a higher supply-chain profit, the retailer offering the extended warranty or the manufacturer? How do the optimum price and extended warranty length vary under different scenarios? We find that, depending on the parameters, either party may provide better extended warranty policies and generate more system profit. We also compare these two decentralized models with a centralized system where a single party manufactures the product, sells it to the consumer and offers the extended warranty. We also consider an extension of our basic model where either the manufacturer or the retailer resells the extended warranty policies of a third party (an independent insurance company, for example), instead of offering its own policy.
Description
This is the author's accepted manuscript. The original publication is available at http://dx.doi.org/10.1111/j.1937-5956.2011.01300.x.
Collections
Citation
Li, Kumpeg, Suman Mallik, and Dilip Chhajed. "Design of Extended Warranties in Supply Chains under Additive Demand." Production and Operations Management 21.4 (2012): 730-46. http://dx.doi.org/10.1111/j.1937-5956.2011.01300.x
Items in KU ScholarWorks are protected by copyright, with all rights reserved, unless otherwise indicated.
We want to hear from you! Please share your stories about how Open Access to this item benefits YOU.