A discounted machine‐replacement model with an expected future technological breakthrough

Tzvi Goldstein, Shaul P. Ladany, Abraham Mehrez

Research output: Contribution to journalArticlepeer-review

32 Scopus citations

Abstract

A machine‐replacement problem is analyzed in a technological‐development environment, in which a new‐type machine (built by a new technology) may appear in the future. The solution of the replacement problem depends on purchasing, operating, and resale costs, and on the probability distribution of the market debut of the new technology, and it indicates whether to replace the existing machine now with an available similar type of machine, or to continue to operate the existing machine for at least one more period. A dynamic discounted cost model is presented, and a method is suggested for finding the optimal age for replacement of an existing machine (under rather general conditions of a technological environment). A solution procedure and a numerical example are given.

Original languageEnglish
Pages (from-to)209-220
Number of pages12
JournalNaval Research Logistics
Volume35
Issue number2
DOIs
StatePublished - 1 Jan 1988

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