The Impact of Used Products on Channel Coordination and Quality Decision for Warranted Products  
Author Hui-Chiung Lo


Co-Author(s) Ruey Huei Yeh; Nani Kurniati; Jung-Jung Lin


Abstract This paper studies a problem of channel coordination for durable products sold with a warranty. Offering warranty may promote the customer’s satisfaction, but it also results in additional costs for manufacturers. The warranty cost depends on the quality of products. At the same time, cost-sharing contract is a negotiating mechanism to achieve channel coordination and increase the competitiveness of a supply chain. Hence, we try to introduce a warranty cost sharing policy which the warranty cost is shared out between manufacturers and retailers. In addition, many sales of a new product occur simultaneously with a trade-in of the used product to reduce purchasing cost and confirm to the sense of environmental protection. In other words, manufacturers and retailers of new products have to contend with the potential competition from a second-hand market. Therefore, taking account of used products, this paper employs a two-period game model to analyze the benefits of channel coordination and optimal pricing and quality decisions in a manufacture-retailer supply chain for new goods sold with warranty.


Keywords Durability, Channel coordination, Cost sharing, Heterogeneous consumer
    Article #:  1964
Proceedings of the 19th ISSAT International Conference on Reliability and Quality in Design
August 5-7, 2013 - Honolulu, Hawaii, U.S.A.