An outcome-based maintenance contracting model by considering multi-criteria and risk equilibrium

Jong Jang Lin, Yi Kuei Lin*, Louis Cheng Lu Yeng, Ruey Huei Yeh

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

In recent years, the system maintenance service has been transitioning from the resource-based contract (RBC) approach towards a new outcome-based contract (OBC) approach, enabling better profits for the service provider and lower cost and risk equilibrium for the service buyer. Prior studies usually focus on a single criterion as a service outcome for a complex and repairable system. This paper proposes a novel risk equilibrium OBC model with a given multi-outcome in maintenance service. The proposed model solves the multi-criteria obligation problem in a complex repairable system maintenance service to achieve three objectives: searching for a dominant risk equilibrium and inner cost, attaining the system's expected outcome, and controlling the multi-outcome and risk equilibrium. The proposed model can apply to disparate maintenance policies comprising various preventive and corrective maintenance methods. Furthermore, the proposed model presents a comparative mechanism to different contract types by game-theoretical analysis, which leads to a first-best solution and avoids moral hazard problems. The case study shows that the proposed OBC model forms a game-theoretical equilibrium for both parties, ensuring the risk equilibrium with the optimal cost.

Original languageEnglish
JournalAnnals of Operations Research
DOIs
StateAccepted/In press - 2023

Keywords

  • Maintenance policy portfolio
  • Maintenance service
  • Multi-criteria
  • Outcome-based contract (OBC)
  • Risk equilibrium

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