This paper introduces a two-dimensional warranty policy that accounts for both product age and usage with failure interactions considering preventive maintenance actions. The policy jointly specifies the warranty coverage as well as the period during which a refund or replacement may be offered for a repairable product whose failure rate increases over time. Coverage depends on the product's age and usage, and it ends as soon as either a prescribed age limit or a prescribed usage limit is reached, whichever occurs first. A distinctive aspect of the proposed framework is its incorporation of a lemon period motivated by lemon law, under which the manufacturer is obligated to provide a refund. Importantly, a refund is provided only when a failure satisfies predefined criteria related to either the number of failures or the duration of each repair. The lemon period is typically assumed to be shorter than the overall warranty period. After the refund window closes, any subsequent failures are addressed only through minimal repairs until the warranty expires. The study further models a multi-component system by considering preventive maintenance actions, their effectiveness on system reliability, and the failure interactions between critical and non-critical components. Given a specified cost structure, we investigate the expected total warranty cost rate over the age-based warranty horizon and determine the optimal age-based warranty length from the manufacturer's perspective. A numerical example is provided to illustrate and evaluate the applicability of proposed warranty policy.
Minjae Park (Thu,) studied this question.