Warranty and maintenance service contracts for repairable products

Abstract

This paper deals with warranty and maintenance service contracts for repairable products, which involve three parties – i.e., Manufacturer, Service Agent (SA), and Consumer. Six maintenance service contract (MSC) options are proposed and examined, which include an option where the manufacturer sales a package of a product and maintenance services (known as a product service system). The study of MSCs is done from three different perspectives — the Manufacturer, the SA, and the customer. The goal for the study is to determine the optimal price of each option and to select best option (for the consumer), which maximize profits which are a common interest of the three parties involved. The decision problems for the three parties are modeled using a Stackelberg game theory formulation. As the decision problems are interdependent, then the bi-level optimization formulation is used to find best solutions. A genetic algorithm is used to obtain the best solution (including the best price for each option offered and the best option for the consumer). Numerical examples examining six cases are presented to illustrate the best solution.