Extended warranty pricing considering the time of money

Abstract

Warranty usually plays an important role in providing customers with product assurance. Although the customers have to pay extra money to buy an extended warranty, they can obtain more protections from the company. Our study focuses on the extended warranty; the successive failure times of the repairable product are assumed to be drawn from a non-stationary Poisson process, taking into the consideration of time value of money, to figure out a more precise model of warranty cost.Anumerical example is given to illustrate the model.

Keywords:

• Warranty
• computer industry
• net present value