The Determination Of Optimal Reliability Improvement Level And Warranty Length For Reused Products

Reuse is one of the most efficient strategies as it preserves natural resources, while maintaining the functional properties of the product. However the concerns over the uncertain quality at the end of first life hinder the development of the reused product market. Warranty is believed to have a signal effect of good quality and saves consumers costly expenses of repairing. However, offering warranty results in additional costs for the dealer, this cost might be reduced through upgrade action that improves the reliability of the item. This paper proposes a profit model, considering the age at the end of first life as probabilistic. Optimal reliability improvement level and warranty length are derived so that the expected profit per unit used item for the dealer can be maximized. Numerical example is utilized to demonstrate the feasibility of the proposed approach.