Optimal Age-Replacement Policy for Nonrepairable Products Under Renewing Free-Replacement Warranty

Abstract

This paper investigates the effects of a renewing free-replacement warranty on the age replacement policy for a nonrepairable product. For both warranted, and nonwarranted products, cost models are developed, and the corresponding optimal replacement ages are derived such that the long-run expected cost rate is minimized. Furthermore, we show that the optimal replacement age for a warranted product is closer to the end of the warranty period than for a nonwarranted product. Finally, numerical examples are given to evaluate the impact of a product warranty on the optimal replacement age.