Warranty Policies For Non-Repairable Items Under Risk Aversion

An approach is presented for analyzing full replacement and linear prorated warranty policies for items receiving renewable warranties when failure occurs during the warranty interval. The model corrects a model of Thomas and then extends the methodology by describing how sellers´ risk aversity influences the policy. For constant failure intensities, linear replacement policies are more attractive to risk averse sellers than shorter term full replacement policies that result in the same average cost.