Three-level warranty service contract among manufacturer, agent and customer: A game-theoretical approach

• Presenting a three-level service contract: a manufacturer, an agent and a customer.
• Considering different strategies among three levels based on game theory approach.
• Obtaining the optimal policy for each strategy.

A warranty is a service contract between a manufacturer and a customer which plays a vital role in many businesses and legal transactions. In this paper, various three-level service contracts will be presented among the following three participants; a manufacturer, an agent, and a customer. In order to obtain a better result, the interaction between the aforementioned participants will be modeled using the game theory approach. Under non-cooperative and semi-cooperative games, the optimal sale price, warranty period and warranty price for the manufacturer and the optimal maintenance cost or repair cost for the agent are obtained by maximizing their profits. The satisfaction of the customer is also maximized by being able to choose one of the suggested options from the manufacturer and the agent, based on the risk parameter. Several numerical examples and managerial insights are presented and used to illustrate the models presented in this paper.