Abstract: For equipment products produced by manufacturers, there is a problem of different warranty intervals between a whole equipment machine and its components provided by suppliers. This problem brings high warranty cost to manufacturers, while also affecting consumers’ use and causing their economic losses. To address this issue, this paper investigates a flexible extended warranty strategy for the components provided by suppliers in equipment products. A profit function of suppliers and a cost function of manufacturers are designed respectively through analyzing several cases of different warranty intervals between a whole machine and components. Furthermore, an extended warranty model is proposed, where the objectives are the maximization of supplier’s unit time profit and the minimization of manufacturer’s unit time cost, and the decision variables include the unit time extend warranty price, the single maintenance price during non-extended warranty period, the start and end time of the flexible extended warranty strategy. The model is optimized and solved by Stackelberg game theory. The optimal extended warranty strategies under different prices of extend warranty and maintenance as well as under the maximum cost budget of manufactures are obtained respectively through theoretical and numerical value analysis.

Key words: equipment products, a whole machine and components, warranty intervals, flexible extended warranty, Stackelberg game