The Optimal Warranty Strategy In A Supply Chain With Different Retail Pricing Policy

In this paper, we consider a manufacturer who sells products with base warranty to consumers through a retailer, who can design an extended warranty to the base warranty, and use two pricing policies:fixed price and price negotiation. Combing the sales formats of the extended warranty together with two pricing policies, we characterize the optiomal pricing decisions of the manufacturer and the retailer, the optimal warranty decisions of the retailer and their respective profit in the channel in four strategies. In the extension, we also characterize the optimal warranty decisions of the manufacturer and the retailer. Our results show that the warranty decisions are irrespective of the pricing policies adopted by the retailer and both parties are better off when the retailer sells the product bundled with the extended warranty and allows price negotiation.