A value-at-risk approach to optimisation of warranty policy

Ming Luo, Shaomin Wu

Research output: Contribution to journalArticle

7 Citations (Scopus)

Abstract

In the real world, a manufacturer may produce many products, which may have common components installed. Consequently, the frequencies of the warranty claims of those products are statistically dependent. Warranty policy optimisation in the existing research, however, has not considered such statistical dependence, which may increase bias in decision making. This paper is the first attempt to collectively optimises warranty policy for a set of different products, produced by one manufacturer, whose failures are statistically dependent, using tools borrowed from financial mathematics (i.e., value-at-risk theory and copula). We prove the existence of the optimal solutions for different scenarios. Numerical examples are used to validate the applicability of the proposed methods.
LanguageEnglish
Pages513-522
Number of pages10
JournalEuropean Journal of Operational Research
Volume267
Issue number2
Early online date6 Dec 2017
DOIs
Publication statusPublished - 1 Jun 2018
Externally publishedYes

Fingerprint

Warranty
Value at Risk
Decision making
Optimization
Financial Mathematics
Risk Theory
Dependent
Copula
Optimal Solution
Decision Making
Optimise
Numerical Examples
Scenarios
Policy
Value at risk

Cite this

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A value-at-risk approach to optimisation of warranty policy. / Luo, Ming; Wu, Shaomin.

In: European Journal of Operational Research, Vol. 267, No. 2, 01.06.2018, p. 513-522.

Research output: Contribution to journalArticle

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