Common Contracts

Maintenance Contract of a Revenue-Earning Asset with Discrete Preventive Maintenance

February 23rd, 2016

• Filed
  February 23rd, 2016

Abstract:This paper deals with maintenance service contract for a dump truck sold with a one-dimensional warranty. We consider a situation where an agent offers two maintenance contract options and the owner of the equipment has to select the optimal option. The option are the OEM only carries out failure below a specified value while the costumer undertakes preventive maintenance action in-house and the OEM carried out all repairs and preventive maintenance activities.Moreover, we study the maintenance service contract considering reduction of the intensity function after preventive maintenance from both the owner and OEM point of views. We use a non-cooperative game formulation to determine the optimal price structure (i.e., price of each contract and maintenance effort) for the OEM and the optimal option for the owner. The result derived from the model has shown that if the owner choose option with maintenance contract then the owner obtain a higher profit compared with the profit r