Repair-replace strategies for two-dimensional warranty policies

Abstract

For repairable items sold with free replacement warranty, the actions available to the manufacturer to rectify failures under warranty are to 1. (1) repair the failed item or 2. (2) replace it with a new one. A proper repair-replace strategy can reduce the expected cost of servicing the warranty. In this paper, we study repair-replace strategies for items sold with a two-dimensional free replacement warranty.