International Journal of Statistics and Reliability Engineering

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Vol 4, No 1 :

openaccess

A Bayesian Approach to the Optimal Warranty Length for an Exponential Life Time Product

D. T. Patel , M.n Patel

Abstract

The major goal of the manufacturing firm is to increase profit. The sale volume and warranty are the important factors for making products. A good warranty policy signals the higher reliability of the product. A longer warranty period increases significantly the production cost. In this regard it is important to determine optimal period. The optimal warranty is that which maximize the expected utility of the product. In this paper a decision model is presented for manufacturing firms to determine the optimal warranty length based on the maximization of expected utility function. We have considered a combination of free replacement policy and pro-rata policy for warranty. The results obtained are compared with a single free-replacement and pro-rata policy. Under a Bayesian setup the expected utility function is derived for an exponential life time distributed product. A real data is considered for illustration. A sensitivity analysis is carried out to check the effect of hyper parameters on the optimal warranty length and the optimal value of expected utility. Some findings are presented based on the sensitivity analysis.

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ISSN(P) 2350-0174

ISSN(O) 2456-2378

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