Approximating Expected Warranty Costs
Edward W. Frees, Seong-Hyun Nam
Management Science · 1988 · Volume 34 · Issue 12
Abstract
In this paper, we survey a portion of the literature in the analysis of warranty costs. In order to compare the price of different warranty policies, we review a framework which leads to expressing the expected costs in terms of complex functions arising in renewal theory. These functions and several approximations are discussed. In particular, a straight line approximation performs well.
Keywords
free replacement warranty, pro rata warranty, product life cycle, renewal function
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