@article{8506814bc044428c8b58d9b2d3d24ceb,
title = "Estimation of gross profit for a new durable product considering warranty and post-warranty repairs",
abstract = "This article presents an integrated model to estimate the gross profit for a new durable product to be sold in a fixed sales period at a fixed price. It is assumed that the sales over time can be characterized by a stochastic Bass model in the form of a nonhomogeneous Poisson process and the production system is a make-to-order type of system. An approximate yet accurate approach is developed to quantify the expected total cost of production involving a learning effect. Moreover, a non-renewable free minimal-repair warranty and non-free post-warranty service are considered for the repair service offered by the manufacturer. To quantify the related costs and profit, the fact that customers may not always request warranty and/or post-warranty repairs is explicitly addressed and modeled. A numerical example is provided to illustrate the effects of some key parameters, including the product reliability, price elasticity, and warranty period elasticity, on the optimal settings of the price, warranty period, and post-warranty charge. The saturation effect of sales process on achieving the optimal gross profit is also discussed.",
keywords = "Learning effect, New product, Post-warranty, Stochastic Bass model, Warranty",
author = "Wei Xie and Haitao Liao and Xiaoyan Zhu",
note = "Funding Information: This work was supported in part by the National Science Foundation under grant CMMI 1238304 and the Department of Energy under grant DE-EE0004167. The authors would like to thank the Associate Editor and three anonymous reviewers for their valuable comments and suggestions that helped considerably improve the quality of the manuscript. The authors would also like to thank Zhengxing Lian at University of Science and Technology of China for the valuable discussion on Theorem 1. Funding Information: Haitao Liao is an Associate Professor of Systems and Industrial Engineering and Director of Reliability & Intelligent Systems Engineering Laboratory at the University of Arizona, Tucson. He received his Ph.D. degree in 2004 from the Department of Industrial and Systems Engineering at Rutgers University. He also received M.S. degrees in Industrial En- gineering and Statistics from Rutgers University. His research interests focus on modeling of accelerated testing, probabilistic risk assessment, maintenance models and optimization, spare part inventory control, and prognostics. His current research is sponsored by the National Science Foundation and U.S. Nuclear Regulatory Commission. He is a member of IIE and INFORMS. He is a recipient of the National Science Foundation CAREER Award in 2010 and the winner of the 2010 William A. J. Golomski Award.",
year = "2014",
doi = "10.1080/0740817X.2012.761370",
language = "English (US)",
volume = "46",
pages = "87--105",
journal = "IIE Transactions (Institute of Industrial Engineers)",
issn = "0740-817X",
publisher = "Taylor and Francis Ltd.",
number = "2",
}