Optimal decision for two dimensional maintenance service contract involving three parties

Abstract

A two-dimensional (i.e. time and use) maintenance service contract involving three parties i.e. manufacturer, agent and consumer are considered in this paper. The contract period by the manufacturer/agent begins since the warranty expires (W) until the lifetime of the equipment expires (L). The use of equipment by consumer is modeled with accelerated failure time (AFT) model. AFT model specifies the limit value of permitted equipment usage (Ul). The contract time is limited to t = L, but equipment usage may exceed Ul. High use of equipment will increase consumer revenue. However, the consumer will incur additional costs paid to the manufacturer/agent if the use of equipment exceeds Ul. Therefore, consumers will seek the optimum value of use (U∗) that maximizes the profits. As with consumer, manufacturer and agent also want to maximize their profits. Decision problems in maintenance service contracts involving the three parties will be resolved consider the interaction of the manufacturer and the agent in carrying out maintenance action. One level optimization used if the manufacturer and agent compete with each other. However, if the manufacturer and agent interact in a cooperation, then optimization of the decision model becomes more difficult and should be done with bilevel optimization.