Determining Best Policy in Three-Level Contract among the Manufacturer, Agent and Customer

Warranty as a kind of service contract today plays a role key in business and legal transactions. In this paper, we present a manufacturer, an agent and a customer's model under different service contracts suggestions. The manufacturer's profit is maximized by determining sale price, warranty period and warranty price. In addition we obtain optimal maintenance cost or repair cost for the agent's model to maximize the agent's profit. Moreover, the customer maximizes his/her profit by choosing one of the options that are suggested by the manufacturer and the agent. We also consider the interaction between the manufacturer, the agent and the customer by using game theory approach. Nash equilibrium is obtained under non-cooperative game. In the non-cooperative game the manufacturer, the agent and the customer choose their best strategy separately and simultaneously. Finally, numerical examples presented in this paper, will be used to illustrate our model.