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Joint Dynamic Optimization of Price and Two-Dimensional Warranty Policy

Cheong, Kam Fu, Zhang, Chi, Zhang, Yang (2021) Joint Dynamic Optimization of Price and Two-Dimensional Warranty Policy. IEEE Transactions on Engineering Management, 68 (2). pp. 528-547. ISSN 0018-9391. (doi:10.1109/TEM.2019.2905004) (KAR id:101258)


This paper studies the joint optimization of price and two-dimensional (2-D) warranty policy with limits of both warranty length and usage. For this purpose, in this paper, we first propose a new sales function to characterize the joint influence of price, warranty length, and usage limit on the sales rate while considering the influence of the heterogeneous customer usage rate. Then, we model the joint dynamic optimization of price and 2-D warranty policy as a nonlinear optimal control problem, and solve it via a numerical approach based on Pontryagin's maximum principle. We show that the proposed dynamic 2-D warranty policy can help achieve higher profits than the existing one-dimensional policies and static 2-D policy.

Item Type: Article
DOI/Identification number: 10.1109/TEM.2019.2905004
Uncontrolled keywords: Dynamic decision making, heterogeneous usage rate, joint optimization, reliability, two-dimensional (2-D) warranty
Subjects: H Social Sciences
Divisions: Divisions > Kent Business School - Division > Department of Analytics, Operations and Systems
Funders: National Natural Science Foundation of China (
Depositing User: Yang Zhang
Date Deposited: 12 May 2023 21:25 UTC
Last Modified: 04 Mar 2024 19:26 UTC
Resource URI: (The current URI for this page, for reference purposes)

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