Determining the Profit Maximization Warranty Period and Selling Price

摘要

In this study, we determine the optimal warranty period or selling price to maximize the profit of a sold product. The impact of the renewing free-replacement warranty (RFRW) on the customer demand is considered. The warranty period and the customer demand can be positively correlated for a certain range of the selling price is assumed. To model such a relation, we utilize the Cobb-Douglas-type demand function of selling price and warranty period to determine the profit maximization warranty period and/or selling price for the manufacturer.