This thesis is concerned with the economic design of screening procedures for products sold under warranty. Optimal screening procedures are proposed to minimize the expected total cost which includes three cost components; inspection cost, warranty cost and the cost due to disposing a rejected item.
Two screening procedures based on performance and screening variables are considered for the cases where performance variable is dichotomous and continuous. For dichotomous case, optimal cutoff values on screening variable are obtained for logistic and normal models; It is assumed that the proportions of conforming and nonconforming items are logistic functions of screening variables in logistic model and that screening variable given performance variable is normally distributed in normal model. For continuous case, optimal cutoff values are obtained under the assumption that the performance and screening variables are jointly normally distributed. Sensitivity analyses are also performed to investigate the effects of errors in the estimation of costs and parameters.
