A maintenance service contract for a warranted product

Abstract

In this paper, we investigate a maintenance service contract for a warranted product carried out by the Original Equipment Manufacturer (OEM). The model was developed under the assumption that there are one consumer and one service provider who is the OEM. This is typically applied to the situation where the OEM is the only service provider such as in the mining industry. From the OEM point of view, two contract options were considered, they are: the OEM carried out all repairs and preventive maintenance activities; the OEM carries out failure and the customer undertakes in house preventive maintenance actions. The model uses a non-cooperative game formulation by maximizing expected profits. We use a linear function of failure intensity to consider a product with increasing failure intensity. We obtain the pricing structure in the contract. And for the customer, they can choose the optimal option under the term of contract.