Optimum Warranty Policies for Nonreparable Items

Abstract

An approach is presented for establishing and evaluating warranty policies for products receiving renewable warranties when failure occurs during warranty. A general rebate model is described that allows total compensation to a consumer for failures during a fixed period and prorated compensation for a remaining interval of time. Associated warranty costs are weighed against the s-expected benefit to be derived from the program. Conditions for optimum warranty intervals are provided. Closed form results are given for exponentially and uniformly distributed failure times. The more complicated case of Weibull failure times is demonstrated by example. A sensitivity analysis of the parameters is included.