Optimal Replacement Policies for Irreparable Warrantied Items

This article investigates age replacement policies for irreparable items sold under warranty. Since the costs of replacement depends on terms of warranty, the analysis of age replacement policies is more complex. Optimal age replacement policies that minimize the long run average cost rate are constructed. For warrantied items with increasing failure rates, the optimal policy is to replace functioning items after a finite period of time. A few examples are presented to illustrate the theory.