Abstract:

Extended warranty （EW） services have been regarded as a key strategy for enhancing profit growth in supply chains involving manufacturers and retailers. With the development of digital technologies， dual-channel sales， where both manufacturers and retailers sell directly to consumers， have become increasingly prevalent. In this context， critical decisions regarding the determination of EW pricing and service levels have been raised， particularly under the influence of customer channel preference shaped by individual tendencies and product characteristics. Although prior studies have examined various aspects of EW service management， such as coordinated pricing， service level decisions， and channel strategies under dual-channel settings， the joint decision-making of EW price and service level in such contexts has been largely overlooked. Specifically， the influence of customer channel preference on the strategic behaviors and profit outcomes of supply chain members has not been systematically explored. In order to solve the above problems， a dual-channel supply chain consisting of a single manufacturer and a single retailer is considered. Two models are developed in which either the manufacturer or the retailer determines the pricing and service level of the extended warranty. How customer channel preference influences the decision-making behaviors of the manufacturer and retailer， along with their respective profits and the overall supply chain profit under different decision-making structures， is explored. Finally， numerical experiments are conducted to further investigate and validate the conclusions. The findings reveal that： （1） Due to the investment threshold required to enter the extended warranty market， both manufacturers and retailers need a certain proportion of customer demand to maintain the economic viability of both parties. （2） Under high EW price sensitivity， when the manufacturer decides on the EW price and service level，as the proportion of customers purchasing EW from the manufacturer increases，the manufacturer’s profit decreases，while the retailer's profit and the overall supply chain profit increase. In this scenario，the manufacturer should lower the product wholesale price and EW price to protect its profit， while the retailer should increase the product retail price to enhance product revenue. （3） Conversely， under high EW price sensitivity， when the retailer decides on the EW price and service level， as the proportion of customers purchasing EW from the manufacturer increases， the profits of the manufacturer， retailer， and the entire supply chain all decrease. The manufacturer should lower the wholesale price to stimulate the retailer's procurement， while the retailer should raise the product retail price and EW price， and reduce the service level when product price sensitivity is low， to increase sales and EW revenue. （4） For the supply chain， the model where the retailer determines the EW service is more advantageous. The theoretical understanding of dual-channel coordinated decision is enriched， and actionable insights are provided for supply chain managers.

Key words: extended warranty service level, customer channel preference, game theory