Optimal warranty policy with repair time threshold under repair-replacement warranty considering the expected total profit

초록

In this study, we introduce a profit optimization model that involves the creation of associated sales price and warranty cost models. The objective is to determine the optimal combination of warranty length and the repair time limit that maximizes the profit function. Given the relationship between warranty period and selling price, we propose a novel approach of warranty period pricing, which can assist industry professionals in effectively pricing products and determining the optimal warranty length to optimize overall profitability. Furthermore, this research provides valuable managerial insights to develop competitive warranty policy and pricing strategies. We find that in practice, under certain reasonable conditions, this warranty-based pricing rule provides an easy way to price the product under a warranty with an appropriate coverage period, while also generating the maximum profit, and capturing more market share for the manufacturer. This paper demonstrates the practical applicability of the proposed methodology through numerical examples. © 2026 Elsevier Inc. All rights are reserved, including those for text and data mining, AI training, and similar technologies.

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