Extended warranty service provision: A strategic analysis for the E-commerce platform supply chain

Motivated by the industrial practice that the giant E-commerce platforms are well motivated to engage in offering the extended warranty service, this paper investigates the optimal extended warranty provision with a platform supply chain. Depending on who acts as the extended warranty underwriter with the two online channel modes (i.e., the online agency mode or the online reselling mode), several different extended warranty scenarios are hence formulated, based on which we apply Stackelberg game to address the equilibria. With the analytical studies, our results show several important and interesting insights. For example, but not limited to, it is found that: (a) the dynamics of the optimal extended warranty strategy is largely different in response to various combinations of the warranty underwriters and the online channel modes; (b) the agent, who takes the ownership over the product (i.e., the manufacturer with the online agency mode and the platform with the online reselling mode), acts more responsively in providing the extended warranty service across the two online channel modes; (c) offering the pricing discount is an important intermediary that affects the Pareto improvement zone benefiting the two individuals in this platform supply chain; (d) the specific extended warranty strategies that the warranty underwriter adopts across two online channel modes induce a significant implication for selecting the optimal online channel modes for both warranty underwriters. These results derived in our paper shed lights for the platform supply chain practice on who and when to offer the extended warranty service.

Automated summary

Motivated by the industrial practice of giant E-commerce platforms offering extended warranty service, this paper investigates the optimal extended warranty provision in a platform supply chain. The study reveals that the dynamics of the optimal extended warranty strategy vary significantly depending on different combinations of warranty underwriters and online channel modes. Furthermore, the results highlight the importance of the ownership of the product and pricing discount as influential factors in the platform supply chain.