A Study On The Product Cost-Sharing Policies Based On Life-Time Product Warranty

Product warranty is becoming increasingly important due to rapid technological development and tough competition in the product market. One of the major decision variables in making warranty terms is the warranty period. A longer warranty term signals better reliability and provides higher customer peace of mind. A large number of products recently are being sold with long term warranties in the form of extended warranty, warranty for used product, long term service contracts, and life-time product warranty. Life-time product warranty is becoming more and more popular as this type of warranties provided assurance to consumer for a long reliable service and protecting consumers against poor quality and the potential high cost of failure occurring during the long uncertain life of product.Some manufacturers offer free rectification lifetime warranty policies for consumers since the beginning of the 21th century, and some researchers have developed model for estimating costs for free rectification lifetime warranty policies. But in realistic lives, offering free rectification lifetime warranty incurs costs to the manufacturers over the useful life of the product. And this cost needs to be factored into the price of product and the net sale. This will reduce the profit of manufacturer even incur loss. The study of lifetime warranty is important to both manufacturers and the consumers. Offering a lifetime warranty and long term service contracts incur costs to the manufacturers over the useful life of the product. According to the taxonomy of lifetime warranty developed by Rahman and Chattopadhyay, this thesis propose and research the cost-sharing programs which have practical significance of devising warranty policy for manufacturers and deciding to buy which products for consumers.First, product warranty theory,long-term warranty theory and the application of cost-sharing theory with product warranty have been expatiated in this paper. Next, defined the period of life-time product warranty and according to the taxonomy of life-time product warranty, the cost-sharing policies based on life-time product warranty have been proposed. The cost-sharing policies include: specified parts excluded(SPE),limit on individual cost(LIC),limit on total cost(LTC),limit on total and individual cost(LTIC). Then developed risk models for analyzing and comparing the cost-sharing pilicy and free rectification life-time warranty.Mathematical models for predicting failures and expected costs for the cost-sharing policies developed and analyzed by capturing the uncertainties of lifetime coverage period and the uncertainties of rectification costs over the lifetime. Failures and costs are modeled using stochastic techniques. Then the effect of various parameters on the warranty cost of these policies have been analyzed by uesing some numerical examples and some results have been got. Finally, the dates of case are used to verify these above results of the analysis.