Optimizing Sustainability and Profitability: A Two−Phase Extended Warranty Framework for Reman and New Products in Monopolistic OEMs

Remanufactured products are now a vital part of Original Equipment Manufacturers (OEMs) product portfolio due to the financial benefits associated with them, as well as increased awareness about the need for economic and environmental sustainability on a regional as well as global level. Further, reman products appear to have substantially enhanced dependability when they become available on the product market because they are significantly more reliable. When a product appears (is sold) on the market, providing an extended warranty is one of the most effective methods of highlighting its reliability and standard quality. To determine the optimal pricing and production strategy for a monopolistic OEM who also participates in (re)manufacturing, the author proposes a two−phase Extended Warranty (EW) model for remanufactured (reman) and new products. By using the Karush−Kuhn−Tucker Non−Linear Optimization Programming Model, this study devises a framework for evaluating optimal prices, demands, and profitability of reman and newly produced products that incorporate an EW using a model framework. Based on the findings of our investigation, the OEM can choose to manufacture/produce a reman product, a new product, or a combination of reman and new products. Moreover, a numerical analysis has been conducted to determine the significance of EW, product failure rates, and customer preferences for both reman and brand−new products. The primary objective is to assess the impact of the EW. Through this study, the authors intend to highlight the importance of the EW in the purchasing decisions of customers. The results of the analysis will help to identify the key factors that influence the consumer’s willingness to buy a product with an EW. This study is crucial for businesses that want to understand the importance of EW in the market and tailor their strategies accordingly. The research findings indicate that OEMs might benefit by adding an EW to their product line as it could increase their profits.