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

Mamer, John W.

Nav. Res. Logist. Q. 29, 345-356 (1982).

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

Keywords:

short run total costs; long run average costs; products under warranty

Citations:

Zbl 0331.60061

References:

[1]	and , ”Statistical Theory of Reliability and Life Testing, Probability Models,” (Holt, Rinehart and Winston, Inc. 1975).
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[4]	”Warranty Policies: Consumer Value vs. Manufacturer Costs,” TR No. 198, Department of Operations Research, Stanford University, Stanford, CA (1981).
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[6]	Glickman, Management Science 22 pp 12– (1976)
[7]	Johns, Annals of Mathematical Statistics 34 pp 396– (1963)
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