A POISSON REGRESSION-MODEL FOR 2-ATTRIBUTE WARRANTY POLICIES

We discuss the two-attribute warranty policy in which two types of war ranty characteristics, such as product age and mileage in the y-year-m -mile protection plan in the automobile industry, are employed simulta neously as criteria in determining the warranty eligibility of a faile d product. Based on the Poisson regression model and von Neumann-Morge nstern expected utility theory, we develop two kinds of two-attribute warranty policies: a fixed two-attribute warranty policy in which all customers are offered the same warranty plan, and a flexible two-attri bute warranty policy in which customers are permitted to choose any wa rranty plan among the numerous plans furnished by the producer. A nume rical example is presented to illustrate the procedure for determining the optimal warranty price in the fixed two-attribute warranty model and for generating a set of warranty plans for the same warranty price in the flexible warranty model. It appears desirable from both the pr oducers' and consumers' viewpoints to convert the classical single-att ribute warranty policy into a fixed two-attribute policy or, even furt her, into a flexible two-attribute policy. (C) 1994 John Wiley & Sons, Inc.