One‐dimensional warranty cost analysis for second‐hand items: an overview

Purpose – The purpose of this paper is to review and develop stochastic models for the evaluation of the expected warranty cost, from dealer's viewpoint, for second hand items sold under different warranty policies. Design/methodology/approach – This study makes a useful contribution to the warranty literature by developing a framework to study one dimensional warranty policies for second‐hand products from dealer's viewpoint. Also, numerical examples are provided to illustrate the application of these models. Findings – Despite the fact that warranties for second‐hand products are commonly used, the accurate pricing of warranties in many situations remains an unsolved problem, for both the dealer and customer. The proposed framework allows the dealer to analyze the cost of alternative warranty policies before deciding on the policy to be offered with the sale of a second‐hand item. Originality/value – The policies and models developed in this paper can be useful in managerial decisions making related to second‐hand products such as automobiles, home appliances, helicopters, electronic equipment and electronics.