Multi-period lease contract for remanufactured products

Abstract

Consider a lessor (service provider) offering a multi-period lease contract (LC) for remanufactured products. The LC proposed has two attributes –i.e. $m$periods, $\left(m⩾1\right)$ and a usage threshold (a limitation of usage allowed). If the total usage of the product is below the usage threshold during the LC periods, then no extra charge is required. Otherwise the lessee needs to pay some extra charge. The lessor is responsible to carry out maintenance actions during the LC periods, and promises a high availability (or a low downtime). If the downtime is above the target then there will be a penalty cost to the lessor. The LC price for the remanufactured product is much cheaper, and hence it becomes attractive and needs to be considered when the lessee is looking for a better option of a LC. For the multi-period LC studied, the lessor will decide the maintenance policy and the price for the LC offered, whilst the lessee will find the rate of its usage and the LC periods suitable to its business. The numerical examples are presented to illustrate the optimal decision variables for each party.