Optimal Warranty Length for a Rayleigh Distributed Product With Progressive Censoring

• Published in: IEEE transactions on reliability Vol. 59; no. 4; pp. 661 - 666
• Main Authors: Wu, Shuo-Jye, Huang, Syuan-Rong
• Format: Journal Article
• Language: English
• Published: New York IEEE 01.12.2010; The Institute of Electrical and Electronics Engineers, Inc. (IEEE)
• Subjects: Associate members; Bayesian analysis; Bayesian methods; Consumers; Cost benefit analysis; Cost function; dissatisfaction cost; economic benefit; Economic forecasting; Illustrations; Maintenance; Manufacturing; Marketing; Marketing and sales; Markets; Optimization; Policies; posterior predictive distribution; Probability density function; Warranties; warranty cost
• ISSN: 0018-9529; 1558-1721
• DOI: 10.1109/TR.2010.2055950

In an intensely competitive market, one way by which manufacturers attract consumers to their products is by providing warranties on the products. Consumers are willing to purchase a high-priced product only if they can be assured about the product's reliability. A longer warranty period usually indicates better reliability. However, offering an unlimited warranty is unrealistic because maintaining such a policy needs very high cost. In this article, we investigate a decision problem under the warranty which is a combination of free-replacement, and pro-rata policies. We use a Bayesian approach to determine the optimal warranty lengths. The Rayleigh distribution is employed to describe the product lifetime. An example with real data is presented for illustration.