Determining optimal warranty periods from the seller's perspective and optimal out-of-warranty replacement age from the buyer's perspective

This paper considers a general repairable product sold under a failure-free renewing warranty agreement. In the case of a general repairable model, there can be two types of failure: type I failure (a minor failure), which can be rectified by minimal repairs; and type II failure (a catastrophic failure), which can be removed only by replacement. After a minimal repair, the product is operational but the failure rate of the product remains unchanged. The aim of this paper is to determine the optimal warranty period and the optimal out-of-warranty replacement age, from the perspective of the seller (manufacturer) and the buyer (consumer), respectively, while minimizing the corresponding cost functions. Finally, a numerical example is presented.