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Selection of a Farm Machinery Replacement Criterion Using Simulation

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  • Kletke, Darrel

Abstract

Little research has focused on developing a model which farmers can use to make yearly machinery replacement decisions. This paper contains an optimizing replacement criterion and then demonstrates the results of alternative rules of thumb used to implement the criterion in a real world situation.The economic life of a machine is here defined as the interval of time during which that machine reaches its minimum average yearly cost. If a machine is replaced by an exact duplicate with the same annual costs, replacement occurs when the currently owned machine attains its economic life. When average cost reaches its minimum, marginal cost and average cost are equal. This is the same as saying that when economic life is reached, the actual yearly cost (marginal cost) is equal to the average yearly cost of the machine. Theoretically, replacement should occur when marginal cost first crosses average cost from below.

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  • Kletke, Darrel, 1969. "Selection of a Farm Machinery Replacement Criterion Using Simulation," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 1(1), pages 45-51, December.
    • Handle: RePEc:cup:jagaec:v:1:y:1969:i:01:p:45-51_02
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    Cited by:

    1. Musser, Wesley N. & Marable, Ulysses, Jr., 1976. "The Impact Of Energy Prices On Optimum Machinery Size And The Structure Of Agriculture: A Georgia Example," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 8(1), pages 1-7, July.

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