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Joint Determination of Price and Upgrade Level for a Warranted Second-hand Product

Jalali Naini, Seyed Gholamreza, Shafiee, Mahmood (2011) Joint Determination of Price and Upgrade Level for a Warranted Second-hand Product. The International Journal of Advanced Manufacturing Technology, 54 . pp. 1187-1198. ISSN 0268-3768. E-ISSN 1433-3015. (doi:10.1007/s00170-010-2994-7) (KAR id:80816)


An upgrade action is a pre-sale procedure that brings the second-hand item to an improved functional state and effectively reduces its age. This action is usually costly and adds directly to the sale price of the second-hand product, but it improves the product reliability and can reduce the warranty servicing cost. In the present paper, we propose a decision model to determine the optimal price and upgrade strategy of a warranted second-hand product to maximize the dealer's expected profit. The objective function includes both demand and cost functions, where purchase price from an end user, upgrade cost, and warranty cost are involved. We illustrate our finding using real data on second-hand electric device. Also, a sensitivity analysis is conducted to evaluate the effect of model parameters on the optimal solution.

Item Type: Article
DOI/Identification number: 10.1007/s00170-010-2994-7
Uncontrolled keywords: Free replacement; Expected warranty cost; Pro rata warranty; Second-hand item; Upgrade action; Warranty length
Subjects: T Technology > TA Engineering (General). Civil engineering (General) > TA165 Engineering instruments, meters etc. Industrial instrumentation
T Technology > TA Engineering (General). Civil engineering (General) > TA168 Systems engineering
T Technology > TA Engineering (General). Civil engineering (General) > TA401 Materials engineering and construction
T Technology > TJ Mechanical engineering and machinery
Divisions: Divisions > Division of Computing, Engineering and Mathematical Sciences > School of Engineering and Digital Arts
Depositing User: Mahmood Shafiee
Date Deposited: 10 Apr 2020 17:20 UTC
Last Modified: 16 Nov 2021 10:26 UTC
Resource URI: (The current URI for this page, for reference purposes)

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