JOINT DETERMINATION OF PRICE, WARRANTY LENGTH AND PRODUCTION QUANTITY FOR NEW PRODUCTS UNDER FREE RENEWAL WARRANTY POLICY
Journal Title: International Journal for Quality Research - Year 2010, Vol 4, Issue 1
Abstract
An optimal business strategy which integrates the decisions, such as pricing, production quantity, and customer service, in order to maximize profit is vital for any manufacturing industry. Post sale factors like warranty, spare parts availability, maintenance, service and cost play an important role in the sale of a product. As better warranty signals higher product quality which provides greater assurance to customers, warranty is an important factor in marketing new products. In this paper, a decision model with the price, warranty length and production quantity of a product as decision variables to maximize profit based on the pre-determined product life cycle is presented. The study considers free renewal warranty policy for producers in the static sales market. The expected number of renewals based on the warranty length is derived for lognormally distributed products. The effect of model parameters on the profit is studied
Authors and Affiliations
K Jeyakumar, T. Paul Robert
Keywords
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