AbstractIn this paper, we discuss two‐dimensional failure modeling for a system where degradation is due to age and usage. We extend the concept of minimal repair for the one‐dimensional case to the two‐dimensional case and characterize the failures over a two‐dimensional region under minimal repair. An application of this important result to a manufacturer's servicing costs for a two‐dimensional warranty policy is given and we compare the minimal repair strategy with the strategy of replacement of failure. © 2004 Wiley Periodicals, Inc. Naval Research Logistics, 2004.