Promotional Warranty Policies: Analysis and Perspectives

Warranty is a topic that has been studied extensively by different disciplines including engineering, economics, management science, accounting, and marketing researchers [7.1, p. 47]. This chapter aims to provide an overview on warranties, focusing on the cost and benefit perspective of warranty issuers. After a brief introduction of the current status of warranty research, the second part of this chapter classifies various existing and several new promotional warranty policies to extend the taxonomy initiated by Blischke and Murthy [7.2]. Focusing on the quantitative modeling perspective of both the cost and benefit analyses of warranties, we summarize five problems that are essential to warranty issuers. These problems are: i) what are the warranty cost factors; ii) how to compare different warranty policies; iii) how to analyze the warranty cost of multi-component systems; iv) how to evaluate the warranty benefits; v) how to determine the optimal warranty policy. A list of future warranty research topics are presented in the last part of this chapter. We hope that this will stimulate further interest among researchers and practitioners.