Service contracts: A stochastic model

There is a growing trend to outsource maintenance where equipment failures are rectified by an external agent under a service contract. The agentʹs profit is influenced by many factors—the terms of the contract, equipment reliability, and the number of customers being serviced. The paper develops a stochastic model to study the impact of these on the agentʹs expected profit and the agentʹs optimal strategies using a game theoretic formulation.