Frequent technological innovations and price declines adversely affect sales of extended warranties as product replacement upon failure becomes an increasingly attractive alternative. To increase sales and profitability, we propose offering flexible-duration extended warranties. These warranties...

Traditional one-price-for-all extended warranties do not differentiate customers according to their risk attitudes, usage rates or operating environment. These warranties are priced to cover the cost of high usage customers who experience more failures and are willing to pay a risk premium for...