Product Warranty Decisions Under Distributor Remanufacturing Mode

Warranty policy for new and remanufactured products is an effective strategy to enhance sales volumes and improve firms’ profits in a manufacturing/remanufacturing system.Aiming at distributor remanufacturing mode,this paper utilizes Stackelberg game theory to explore the joint decision-makings of warranty and pricing policies under two different market leadership structures(OEM-led and distributor-led)in four warranty models,i.e.,no warranty,only the OEM implements warranty for new products,only the distributor implements warranty for remanufactured products and both parties provide warranties for new product and remanufactured products respectively,Then,under the two leadership structures,the equilibrium solutions,the profits of both parties and total system profit are conducted comparative static analysis in the four warranty models,focusing on the influence of consumers’ preference for remanufactured products,the return rate of used products and the warranty sensitivity coefficient on the choices of warranty strategy;Finally,the comparison of the two leadership structures are presented.The conclusion shows that:(1)No matter what kind of leadership structure is,the warranty sensitivity coefficient is an important factor affecting the warranty motivation of both parties.If the warranty sensitivity coefficient is relatively low,the product warranty strategy will damage the profit of product warrantor and the total profit of the system simultaneously,in this case neither party has any intention to implement product warranty.(2)When the warranty sensitivity coefficient is at the medium and high level,under OEM leadership structure,if the return rate of used products is lower(higher)than the corresponding threshold,the OEM chooses to implement(not to implement)the new product warranty;Provided that the return rate of used products exceeds the corresponding threshold,the implementation of remanufactured products warranty by the distributor is beneficial to the OEM;Under distributor leadership structure,low consumer preference for remanufactured products is the prerequisite for OEM to implement new product warranty,while the return rate of used products above a certain level is a precondition for the distributor to implement remanufactured product warranty.When the OEM implements(does not implement)new products warranty,he hopes that the distributor implements remanufactured products warranty when the return rate of used products is lower(higher)than the corresponding threshold level.No matter what kind of leadership structure and whether the distributor implements remanufactured product warranty,she always hopes that the OEM implements new products warranty;In most cases,joint warranties for new and remanufactured products is the best choice for the whole system.(3)For a given warranty model,the prices of both new and remanufactured products under distributor leadership structure are lower than those under OEM leadership structure.On the contrary,the products warranty levels and products sales volumes under distributor leadership structure are higher than those under OEM leadership structure,so distributor leadership structure is more beneficial to consumers.From the perspective of operational performance of the whole system,it is better when the distributor is the leader.Under this structure,the distributor can provide OEM with a reasonable profit increment distribution mechanism to realize the Pareto improvement for both sides.This study can provide decision supports for firms to choose a reasonable warranty strategy and product pricing in real manufacturing/remanufacturing environment.