After-sales services for durable goods

Kirkizoğlu, Zeynep
Durable goods are products that are designed to be used for an extended period of time and require after-sales activities such as warranty, repair and maintenance. In the first part of this study, we consider a monopolistic durable goods manufacturer that also provides a base warranty and after-sales services to her customers through a designated retailer. The customers are strategic; i.e., they evaluate the total lifecycle cost of the product when making their purchasing decision. However, they can foresee the future costs only to a certain extent. In this setting, we find the manufacturer’s product price decision followed by the spare parts wholesale and retail price decisions made by the manufacturer and the retailer, respectively. As a benchmark, we study the centralized system where the manufacturer and the retailer are integrated. We also study an alternative model, where the manufacturer is not active in the after-sales business and does not offer a warranty, and these services are carried out by an independent retailer. In the second part of the study, we look into downstream competition. The manufacturer and the retailer operate with similar dynamics to the first part, except that the retailer now competes with an independent workshop for after-sales services after the warranty period is over. This competition provides a cheaper alternative to the customers for owning the product, hence changing the strategic decisions of the manufacturer and the retailer. In both parts, we provide managerial insights by studying analytical equilibriums where possible, and by conducting numerical studies otherwise.


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Citation Formats
Z. Kirkizoğlu, “After-sales services for durable goods,” Ph.D. - Doctoral Program, Middle East Technical University, 2022.