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s
1
s
2
:
From the properties of Laplace transforms, we have
f
p
n
s
1
; s
2
f
p
s
1
; s
2
n
2
and
F
p
n
s
1
; s
2
1
s
1
s
2
f
p
s
1
; s
2
n
3
where the superscript (n) denotes n-fold convolution. It is also known from Downton (1970) that when
r 0
F
n
x; y P
n
l
1
xP
n
l
2
y; 4
where P
n
x is the incomplete gamma function dened as follows:
P
n
x
_x
0
u
n21
exp2u du
Gn
: 5
A requisite property of f x; y is that the conditional expectations of X and Y must be increasing
functions of the other variable (Murthy et al., 1995). From Downton (1970) we have,
EXuY y
1 2r
l
1
1r
l
2
l
1
y
and
VarXuY y
1 2r
l
1
1 2r
l
1
12r
l
2
l
1
y
_ _
:
H.-G. Kim, B.M. Rao / Computers & Industrial Engineering 38 (2000) 425434 427
Clearly, EXuY y as well as VarXuY y increase linearly with y. This property coupled with the
very small number of parameters and the analytical elegance makes this a good choice in two-attribute
warranty model.
One limitation of this distribution is that the marginal distributions of X and Y are necessarily
exponential. However, when this condition is satised to an acceptable degree, this property greatly
simplies the tting of the distribution because the only other parameter that needs to be estimated is the
correlation coefcient r. This represents a signicant advantage because in real life item failure data
available to the manufacturer is usually not sufcient to estimate large number of parameters with
precision.
3. 2D renewal processes
A 2D renewal process is a sequence of independent and identically distributed non-negative random
variables {X
n
; Y
n
; n $ 1} with common joint distribution function Fx; y: Let Nx; y denote the
number of renewals over the rectangle 0; x 0; y; with the origin being a renewal point. {X
n
; n $
1} is a sequence of independent and identically distributed random variables with common distribution
function F
1
x Fx; 1 and denes the univariate renewal counting process N
1
x: Similarly, the
sequence {Y
n
; n $ 1} is a 1D renewal process with common distribution function F
2
y F1; y
and denes N
2
y: From Hunter (1974) we have,
Nx; y min{N
1
x; N
2
y}
Analogous to the univariate theory, the 2D renewal function M
r
x; y ; ENx; y is given by:
M
r
x; y
1
n1
F
n
x; y 6
where the subscript r has been included in the denition of the renewal function to highlight that it is a
function of r. Let S
1n
n
i1
X
i
; and S
2n
n
i1
Y
i
denote the points of the nth renewal for the
sequences {X
n
; n $ 1}; and {Y
n
; n $ 1}; respectively. Clearly,
PS
1n
# x F
n
x; 1 F
n
1
x;
and
PS
2n
# y F
n
1; y F
n
2
y:
Since the marginal distributions of X and Y are exponential, the 1D renewal functions M
1
x and M
2
y
are given by:
M
1
x l
1
x; and M
2
x l
2
y: 7
Applying Laplace transformation to both sides of Eq. (6) and using Eq. (3), we obtain the bivariate
Laplace transform of M
r
x; y as:
M
p
r
s
1
; s
2
f
p
s
1
; s
2
s
1
s
2
1 2f
p
s
1
; s
2
:
H.-G. Kim, B.M. Rao / Computers & Industrial Engineering 38 (2000) 425434 428
Substituting for f
p
s
1
; s
2
) from Eq. (1) and simplifying, we obtain:
M
p
r
s
1
; s
2
l
1
l
2
s
1
s
2
l
2
s
1
1l
1
s
2
11 2rs
1
s
2
:
Some algebraic manipulation yields
M
p
0
1 2rs
1
; 1 2rs
2
1
1 2r
3
M
p
r
s
1
; s
2
8
where M
p
0
s
1
; s
2
) is the Laplace transform of M
p
r
s
1
; s
2
) when r 0: By appealing to the scale change
property of 2D Laplace transforms (Hunter, 1974), it can be seen that
L M
0
x
1 2r
;
y
1 2r
_ _ _ _
1 2r
2
M
p
0
1 2rs
1
; 1 2rs
2
: 9
Using Eqs. (8) and (9), we obtain
L M
0
x
1 2r
;
y
1 2r
_ _ _ _
1
1 2r
M
p
r
s
1
; s
2
;
which upon inversion yields
M
r
x; y 1 2rM
0
x
1 2r
;
y
1 2r
_ _
: 10
From Eqs. (4) and (6),
M
0
x; y
1
n1
P
n
l
1
xP
n
l
2
y: 11
Eqs. (10) and (11) provide a convenient means of evaluating M
r
x; y: Established numerical methods
can be employed to compute the 2D renewal function M
r
x; y using Eq. (5). The authors have used the
well known package Mathematica for this purpose.
4. Two-attribute free-replacement policies
In this paper we study two of the four two-attribute warranty policies (labeled A and B) proposed by
H.-G. Kim, B.M. Rao / Computers & Industrial Engineering 38 (2000) 425434 429
Fig. 1. Warranty region for Policy A.
Murthy et al. (1995). Let c denote the manufacturer's cost of each replacement and EC, the expected
warranty cost. We use the superscripts A and B for the two types of policies.
4.1. Policy A
The warranty coverage ends when either the maximum usage limit or maximum time limit are
exceeded. For this policy, the warranty region is the rectangle 0; W 0; U as shown in Fig. 1,
where W and U are the warranty limits for time and usage, respectively.
Let N
A
W; U denote the number of failures occurring under Policy A. Clearly, N
A
W; U
NW; U; and the expected warranty cost is given by
EC
A
W; U cMW; U
with MW; U obtained from Eqs. (5), (10) and (11).
4.2. Policy B
The warranty coverage ends when both the maximum usage limit and the maximum time limit are
exceeded. For this policy, the warranty region is given by two innite strips shown shaded in Fig. 2.
Let N
B
W; U denote the number of failures having occurred under Policy B. This is related to the 2D
renewal process and the 1D processes as:
N
B
W; U Max{N
1
W; N
2
U} N
1
W 1N
2
U 2NW; U:
The expected warranty cost is given by
EC
B
W; U cM
1
W 1M
2
U 2MW; U;
where M
1
W and M
2
U are obtained from Eq. (7) and MW; U from Eqs. (5), (10) and (11).
H.-G. Kim, B.M. Rao / Computers & Industrial Engineering 38 (2000) 425434 430
Fig. 2. Warranty region for Policy B.
Table 1
Numerical example
Usage EX
i
1=l
1
(years) EY
i
1=l
2
10
4
miles) EY
i
=EX
i