Technological breakthroughs and asset replacement
AbstractThe authors analyze the optimal replacement of assets under continuous and discontinuous technological change. They investigate the variable lifetime of assets in an infinite-horizon replacement problem. Due to deterioration, the maintenance cost increases when the asset becomes older. Because of technological change, both maintenance and new capital costs decrease for a fixed asset age. The dynamics of the optimal lifetime is investigated analytically and numerically under technological change in the cases of one and several technological breakthroughs. It is shown that the breakthroughs cause irregularities (anticipation echoes) in the asset lifetime before the breakthrough time.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2008074.
Date of creation: 01 Dec 2008
Date of revision:
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asset replacement; technological change; optimal lifetime; anticipation echoes.;
Other versions of this item:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
- O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-04-05 (All new papers)
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