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research-article

Optimal extended warranty strategy for a two-sided platform under agency selling

Authors:

Zhen HeAuthors Info & Claims

Volume 178, Issue C

https://doi.org/10.1016/j.cie.2023.109129

Published: 01 April 2023 Publication History

Abstract

Platforms are realizing that providing extended warranties not only achieves high profitability but also improves consumer satisfaction. In the current marketplace, extended warranties are often sold along with the products and can be provided by platforms, manufacturers, or both. How platforms and manufacturers develop efficient extended warranty strategies and the interaction between extended warranty strategies are critical questions for decision-makers. This paper proposes a three-stage Stackelberg game model to analyze the decision procedure from the perspective of a platform. Results show that the platform benefits from providing extended warranties in scenarios of large market size, or a moderate market size and a high commission rate; otherwise, the platform should not provide extended warranties. Furthermore, providing extended warranties surprisingly does not always increase product demand in a monopoly market, despite the extended warranty having the market expansion effect. Finally, the platform and the manufacturer achieve a win-win outcome by simultaneously providing extended warranties only when the potential market size is sufficiently large; when the potential market size is quite small, neither the platform nor the manufacturer provides extended warranties; otherwise, only one of the two warrantors provides extended warranties. These results give platforms and manufacturers suggestions for extended warranty strategies design and pricing decisions.

Highlights

•

A three-stage game model is developed for analyzing extended warranty strategies on a two-sided platform.

•

A parameter is included to describe the expansion effect of extended warranties on the product market.

•

Competition is considered when two warrantors are providing extended warranties simultaneously.

•

The market equilibrium is determined considering the interaction of platform and manufacturer extended warranty strategies.

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Cited By

Wan PZhao XXu Q(2024)Research on Pricing and Extended Warranty Strategy of E-commerce Products under Hybrid sales modelProceedings of the 2024 International Conference on Digital Economy and Computer Science10.1145/3705618.3705668(285-291)Online publication date: 20-Sep-2024
https://dl.acm.org/doi/10.1145/3705618.3705668

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Information & Contributors

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Published In

cover image Computers and Industrial Engineering

Computers and Industrial Engineering Volume 178, Issue C

Apr 2023

707 pages

ISSN:0360-8352

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Elsevier Ltd.

Publisher

Pergamon Press, Inc.

United States

Publication History

Published: 01 April 2023

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Cited By

Wan PZhao XXu Q(2024)Research on Pricing and Extended Warranty Strategy of E-commerce Products under Hybrid sales modelProceedings of the 2024 International Conference on Digital Economy and Computer Science10.1145/3705618.3705668(285-291)Online publication date: 20-Sep-2024
https://dl.acm.org/doi/10.1145/3705618.3705668

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