Optimal Warranty Length for a Rayleigh Distributed Product With Progressive Censoring

In an intensely competitive market, one way by which manufacturers attract consumers to their products is by providing warranties on the products. Consumers are willing to purchase a high-priced product only if they can be assured about the product´s reliability. A longer warranty period usually indicates better reliability. However, offering an unlimited warranty is unrealistic because maintaining such a policy needs very high cost. In this article, we investigate a decision problem under the warranty which is a combination of free-replacement, and pro-rata policies. We use a Bayesian approach to determine the optimal warranty lengths. The Rayleigh distribution is employed to describe the product lifetime. An example with real data is presented for illustration.