Modelling cost sharing policies for lifetime warranty

In today’s fiercely competitive market, the warranty period offered by the manufacturer/dealer has been progressively increasing. Estimation of warranty cost is becoming complex because of factors such as uncertainty of cost of parts, labour, downtime and ever increasing introduction of new products into the market. Manufacturer or dealers have started offering lifetime warranties for their products. Uncertainties of product failure and rectification costs are reduced by cost sharing policies. Formulation of attractive policies and estimation of costs for these warranties is important to the manufacturer/dealer for estimating future costs to build it into the sales price or contracts. This paper deals with four new cost sharing lifetime warranty policies and stochastic models for estimation of costs associated with offering these policies.