Optimizing warranty policies for remanufactured products: When should they be longer, shorter, or identical to new product warranties?

Abstract Manufacturers adopt different warranty strategies for remanufactured products, offering shorter, identical, or longer warranty periods compared to new products. However, prior research has only focused on manufacturers offering either shorter or identical warranties. In addition, the existing literature has not captured the diminishing returns of warranties, i.e., as the warranty coverage increases, its incremental benefits begin to decrease but the costs continue to increase. To address these gaps, we develop an optimization model that jointly considers pricing and warranty decisions while accounting for warranty’s diminishing effect on consumer’s willingness to pay for remanufactured products. We show that all three observed warranty strategies for remanufactured products (shorter, identical, or longer) can be optimal, depending on specific market and remanufacturing conditions, which we systematically identify. Our findings also reveal that extending warranty coverage is not always an effective strategy for expanding the remanufacturing market, particularly under extremely favorable or unfavorable market conditions. Our results provide valuable insights and practical guidance for manufacturers in making warranty decisions on remanufactured products.