A performance-based warranty for products subject to competing hard and soft failures

This article studies a performance-based warranty for products subject to competing hard and soft failures. The two failure modes are in the sense that either one, on “whichever-comes-first” basis, can cause product fail. A not only covers repair or replacement of any defect, but also guarantees minimum performance level throughout period. In this article, we propose three compensation policies—that is, free replacement, penalty, full refund, when product’s fails meet guaranteed level. expected servicing costs policies derived, based risks concept. design problem is further formulated simultaneously determine optimal price, length, guarantee so as maximize manufacturer’s total profit. Numerical conducted demonstrate compare policies. It shown refund policy always leads lowest profit, whereas neither other dominate each all scenarios. particular, results higher profit than penalty cost low, coefficient high, and/or reliability high.