Maintenance Contract of a Revenue-Earning Asset with Discrete Preventive Maintenance

Abstract

This paper deals with maintenance service contract for a dump truck sold with a
one-dimensional warranty. We consider a situation where an agent offers two maintenance
contract options and the owner of the equipment has to select the optimal option. The option are
the OEM only carries out failure below a specified value while the costumer undertakes
preventive maintenance action in-house and the OEM carried out all repairs and preventive
maintenance activities.Moreover, we study the maintenance service contract considering
reduction of the intensity function after preventive maintenance from both the owner and OEM
point of views. We use a non-cooperative game formulation to determine the optimal price
structure (i.e., price of each contract and maintenance effort) for the OEM and the optimal
option for the owner. The result derived from the model has shown that if the owner choose
option with maintenance contract then the owner obtain a higher profit compared with the profit
resulted from in-house maintenance.