Warranty Pricing with Product Failures and Forward Looking Consumers: An Empirical Approach

published by seadmin on Wed, 10/23/2013 - 15:39

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Department of Systems Engineering and Engineering Management

The Chinese University of Hong Kong

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Title of the talk: Warranty Pricing with Product Failures and Forward Looking Consumers: An Empirical Approach

Speaker: Prof. Jingqi Wang, School of Business, Hong Kong University

Date: November 8, 2013 (Friday)

Time: 4:30 PM to 5:30 PM

Venue: Room 513,

William M.W. Mong Engineering Building (ERB),

(Engineering Building Complex Phase 2)

The Chinese University of Hong Kong.

Brief Summary of the talk:

This paper considers warranty pricing for durable goods, taking possible product failures into account. Consumers are forward looking and solve a dynamic program to make purchase decisions. Due to the large number of products and remaining warranty lengths, the consumers' problem and the corresponding estimation problem are high dimensional. Therefore, we introduce the so-called inclusive value processes to capture the consumers' "value-to-go", which reduces the dimension of the estimation problem. We estimate consumers' preferences using the resulting structural model and individual level transaction data on product and warranty purchases from an electronics retail chain. By conducting counterfactual experiments, we find that extended warranties are generally underpriced in our data set; and the optimal price differs by brand. Specifically, extended warranties are overpriced for high end brand Sony and underpriced for low end brand RCA. Lastly, we explore the impact of changing product reliability on the retailer's profit.

Short Biography of the speaker:

Jingqi Wang is an Assistant Professor in the School of Business at HKU. He received his Ph.D. in operations management from Kellogg School of Management, Northwestern University. His current research interests include empirical studies in operations management, innovation investment decisions in supply chains, sustainable operations, and operations economics. He holds a M.A. in Economics and a M.S. in Operations Management from Northwestern University, and a Bachelor degree in Industrial Engineering from Tsinghua University.

Everyone is invited to attend the talk.

The talk will be hosted by:

Prof. Long Zhuoyu,

Department of Systems Engineering and Engineering Management,

The Chinese University of Hong Kong,

E-mail: zylong@se.cuhk.edu.hk

Telephone Number: (852) 3943-8330

Homepage: http://www.se.cuhk.edu.hk/people/zylong.html

For general enquiries, please contact the student coordinator:

Shoaib Jameel,

Department of Systems Engineering and Engineering Management,

The Chinese University of Hong Kong,