The Extended Warranty Pricing Policies under Different Maintenance Strategies Considering The Maintenance Level and Purchasing Time

The extended warranty(EW) not only improves manufacturer profitability but also increases customer loyalty, however, when a customer purchases an EW and the manufacturer offers it, the price of the EW needs to be considered. In order to solve the EW pricing problem, we propose four different EW repair strategies. They include minimum maintenance, minimum maintenance combined with preventive maintenance(PM), and maintenance methods that consider reliability design to further reduce the EW price. To determine the win-win EW price range from the manufacturer and customer perspectives, we consider the difference between the actual cost and customer’s perceived cost in the unitary minimum maintenance cost and PM cost due to information asymmetry and repetitive learning effect. Moreover, we consider the impact of EW purchasing time on the EW price range. Finally, a numerical example is presented to illustrate the effectiveness of the proposed policy and obtain the win-win EW range.