Optimal strategies for price, warranty length, and production rate of a new product with learning production cost

This study investigates optimal strategies for price, warranty length, and production rate of a new product in which both static markets for non-durable and dynamic markets for durable products are involved. The mathematical model incorporates both the demand and the cost functions including production, warranty length, and inventory costs. Using the maximum principle approach, the optimal strategies and interactions among price, warranty length, and production rate in both markets are analyzed using some propositions. The analysis shows that to maximize profits in all cases, the price, the warranty length, and the production rate all must go up simultaneously, or one of them must increase and the other two must decrease concurrently. (C) 2013 Sharif University of Technology. All rights reserved.