Price-warranty length decision with Glickman-Berger model

Abstract

Product price and warranty length are the key determinants in the purchase decision of a consumer. This article deals with joint determination of these two attributes so as to maximise the profit of the manufacturer. The decision model of Glickman and Berger is shown to have an important role to play in this context, and is analysed with power law failure process in the case of one-dimensional warranty. A methodology is also proposed to extend this model for two-dimensional warranty.