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Survival and efficiency curves for capital and the time-age-profile of vintage prices

Listed author(s):
  • Erik BiÛrn


    (University of Oslo, Department of Economics, P.O. Box 1095 Blindern, N-0317 Oslo, Norway)

The decline in the service flow from a stock of capital goods with age, due to the physical retirement of capital units and to the gradual loss of efficiency of each unit remaining, can be described by survival curves and efficiency curves. The paper reconsiders the relationship between these curves and the vintage prices of capital under neo-classical assumptions about perfect second hand markets and malleability, using duality between quantites and prices. Three examples with parametric survival and efficiency curves are presented. Concavity of the survival and efficiency curves may be compatible with convexity of the age-price profile. This approach is contrasted with the frequently cited Hulten-Wykoff approach. Empirical illustrations, focusing on the cenvexity/concavity issue, are given.

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Article provided by Springer in its journal Empirical Economics.

Volume (Year): 23 (1998)
Issue (Month): 4 ()
Pages: 611-633

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Handle: RePEc:spr:empeco:v:23:y:1998:i:4:p:611-633
Note: received: September 1995/final version received: May 1997
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