Utilization and Maintenance in a Model with Terminal Scrapping
We draw on three strands of literature dealing with utilization, maintenance, and scrapping in order to analyze the properties of the respective policies and their interac-tions. We do so by focusing on the last period of the received multi-period service life model and extending it in three directions: first, by associating the physical deteriora-tion of equipment to the intensity of its utilization and maintenance; second, by ex-panding on the range of explainable operating policies to allow for idling, mothballing, capacity depleting, capacity preserving, full capacity, upgrading, and downgrading; and, third, by linking the operating policies to the capital policy of scrapping. Owing to these enhancements, the analysis leads to several important findings. One among them is that optimal operating policies behave usually in opposite directions, proceed-ing in time from harder to softer or vice versa, depending on the net revenue earning capability of the equipment under consideration. Another is that profit (loss) making equipment is scrappable iff on the average the operating capital deteriorates faster (slower), or equivalently improves slower (faster), than the scrapping capital. And still an-other result is that operating policies are determined jointly with scrapping policy capi-tal policies, thus suggesting that empirical investigations of their determinants should allow for this simultaneity
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Epstein, L. & Denny, M., 1980. "Endogenous capital utilization in a short-run production model : Theory and an empiral application," Journal of Econometrics, Elsevier, vol. 12(2), pages 189-207, February.
- Bitros, George C, 1976. "A Statistical Theory of Expenditures in Capital Maintenance and Repair," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 917-936, October.
- Johnson, Paul A., 1994. "Capital utilization and investment when capital depreciates in use: some implications and tests," Journal of Macroeconomics, Elsevier, vol. 16(2), pages 243-259.
- Das, Sanghamitra, 1991. "A semiparametric structural analysis of the idling of cement kilns," Journal of Econometrics, Elsevier, vol. 50(3), pages 235-256, December.
- Collard, Fabrice & Kollintzas, Tryphon, 2000. "Maintenance, Utilization, and Depreciation along the Business Cycle," CEPR Discussion Papers 2477, C.E.P.R. Discussion Papers.
- Michele Moretto, 1999. "A Note on Dynamic Optimization, Maintenance Expenditure and Quality of Capital," Metroeconomica, Wiley Blackwell, vol. 50(1), pages 65-86, 02.
- Kim, Moshe, 1988. "The Structure of Technology with Endogenous Capital Utilization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(1), pages 111-30, February.
- Russell Cooper & John Haltiwanger & Laura Power, 1995.
"Machine Replacement and the Business Cycle: Lumps and Bumps,"
NBER Working Papers
5260, National Bureau of Economic Research, Inc.
- John Haltiwanger & Russell Cooper & Laura Power, 1999. "Machine Replacement and the Business Cycle: Lumps and Bumps," American Economic Review, American Economic Association, vol. 89(4), pages 921-946, September.
- Russell Cooper & John Haltiwanger & Laura Power, 1995. "Machine Replacement and the Business Cycle: Lumps and Bumps," Papers 0062, Boston University - Industry Studies Programme.
- Rosen, Sherwin & Nadiri, M Ishaq, 1974.
"A Disequilibrium Model of Demand for Factors of Production,"
American Economic Review,
American Economic Association, vol. 64(2), pages 264-70, May.
- M. Ishaq Nadiri & Sherwin Rosen, 1974. "A Disequilibrium Model of Demand for Factors of Production," NBER Books, National Bureau of Economic Research, Inc, number nadi74-1, 08.
- M. Ishaq Nadiri & Sherwin Rosen, 1973. "A Disequilibrium Model of Demand for Factors of Production," NBER Books, National Bureau of Economic Research, Inc, number nadi73-1, 08.
- Gerald L. Thompson, 1968. "Optimal Maintenance Policy and Sale Date of a Machine," Management Science, INFORMS, vol. 14(9), pages 543-550, May.
- Ellen R. McGrattan & James A. Schmitz, 1999. "Maintenance and repair: too big to ignore," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 2-13.
- Winston, Gordon C, 1974. "The Theory of Capital Utilization and Idleness," Journal of Economic Literature, American Economic Association, vol. 12(4), pages 1301-20, December.
- Morton I. Kamien & Nancy L. Schwartz, 1971. "Optimal Maintenance and Sale Age for a Machine Subject to Failure," Management Science, INFORMS, vol. 17(8), pages B495-B504, April.
- Prucha, Ingmar R. & Nadiri, M. Ishaq, 1996.
"Endogenous capital utilization and productivity measurement in dynamic factor demand models Theory and an application to the U.S. electrical machinery industry,"
Journal of Econometrics,
Elsevier, vol. 71(1-2), pages 343-379.
- Prucha, Ingmar R. & Nadiri, M. Ishaq, 1991. "Endogenous Capital Utilization and Productivity Measurement in Dynamic Factor Demand Models: Theory and an Application to the U.S. Electrical Machinery Industry," Working Papers 91-04, C.V. Starr Center for Applied Economics, New York University.
- Ye, Meng-Hua, 1990. "Optimal replacement policy with stochastic maintenance and operation costs," European Journal of Operational Research, Elsevier, vol. 44(1), pages 84-94, January.
- Howe, Keith M. & McCabe, George M., 1983. "On Optimal Asset Abandonment and Replacement," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 18(03), pages 295-305, September.
- Matthew D. Shapiro, 1985.
"Capital Utilization and Capital Accumulation: Theory and Evidence,"
Cowles Foundation Discussion Papers
736, Cowles Foundation for Research in Economics, Yale University.
- Shapiro, Matthew D, 1986. "Capital Utilization and Capital Accumulation: Theory and Evidence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 1(3), pages 211-234, July.
- Matthew D. Shapiro, 1986. "Capital Utilization and Capital Accumulation: Theory and Evidence," NBER Working Papers 1900, National Bureau of Economic Research, Inc.
- BOUCEKKINE, Raouf & RUIZ-TAMARIT, Ramon, .
"Capital maintenance and investment: complements or substitutes?,"
CORE Discussion Papers RP
1630, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- BOUCEKKINE, Raouf & RUIZ-TAMARIT Ramon, 2001. "Capital Maintenance and Investment : Complements or Substitutes ?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2001012, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- repec:adr:anecst:y:2000:i:58:p:05 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpma:0411016. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.