Extended warranty strategy analysis for online platform marketplace considering product reliability transparency

As an increasingly significant after-sales value-added service in the online platform marketplace, the extended warranty (EW) service plays a pivotal role in improving customer satisfaction and broadening profit channels for platforms and manufacturers. Motivated by this perspective, this study employs game-theoretic models to explore the decision-making responses of various EW underwriters in the online platform marketplace, considering two distinct cases: full transparency and asymmetry in product reliability information. Additionally, we investigate how these decisions influence market dynamics within the online platform marketplace. First, we find that transparency of product reliability can reshape the mechanisms by which reliability affects profits, resulting in different equilibrium reliability. Further analysis reveals that the variation characteristics of these reliability equilibrium outcomes under two sales patterns (the resale and agency patterns) are closely related to the combination of commission rates and warranty efficiency. Notably, the optimal sales strategies of platforms and manufacturers under different EW underwriters and sales patterns also exhibit regularities associated with variations in the above parameters. Furthermore, we show that when reliability information is transparent, platforms offering EW services better protect consumers' interests. However, with asymmetric reliability information, manufacturers providing EW services can benefit both the supply chain and consumers. Interestingly, although asymmetric reliability information can hurt manufacturers' profits, this does not imply that manufacturers should cut R&D expenses by compromising product reliability. Conversely, with quality information becomeing fully transparent, the decreased warranty efficiency is promising to foster a mutually beneficial scenario for other stakeholders. Following these findings, this study presents several new managerial insights to expand on existing literature.