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**Cost analysis of pro rata and free-replacement warranties.**
*(English)*
Zbl 0536.90041

Summary: This article examines the short run total costs and long run average costs of products under warranty. Formulae for both consumer cost under warranty and producer profit are derived. The results in the case of the pro rata warranty correct a mistake appearing in a paper of W. R. Blischke and E. M. Scheuer [ibid. 22, 681-696 (1975; Zbl 0331.60061)]. We also show that expected average cost to both the producer and the consumer of a product under warranty depends on both the mean of the product lifetime distribution and on its failure rate.

### MSC:

90B30 | Production models |

90B25 | Reliability, availability, maintenance, inspection in operations research |

### Citations:

Zbl 0331.60061
Full Text:
DOI

### References:

[1] | and , ”Statistical Theory of Reliability and Life Testing, Probability Models,” (Holt, Rinehart and Winston, Inc. 1975). |

[2] | , and , ”Renewal Tables: Tables of Functions Arising in Renewal Theory,” Graduate School of Business Administration, University of Southern California, Los Angeles, CA (1981). |

[3] | ”A Mathematical Theory of Guarantee Policies,” No. 49, Stanford University, Stanford, CA (1961). |

[4] | ”Warranty Policies: Consumer Value vs. Manufacturer Costs,” TR No. 198, Department of Operations Research, Stanford University, Stanford, CA (1981). |

[5] | Blischke, Naval Research Logistics Quarterly 22 pp 4– (1975) |

[6] | Glickman, Management Science 22 pp 12– (1976) |

[7] | Johns, Annals of Mathematical Statistics 34 pp 396– (1963) |

[8] | Menke, Management Science 15 pp 10– (1969) |

[9] | Applied Probability Models with Optimization Applications (Holden-Day, San Francisco, CA, 1970). · Zbl 0213.19101 |

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