Infinite horizon optimality criteria for equipment replacement under technological change

Authors:
Irwin E. Schochetman;Robert L. Smith
Affiliations:
Mathematics and Statistics, Oakland University, Rochester, MI 48309, USA;Industrial and Operations Engineering, University of Michigan, Ann Arbor, MI 48109, USA
Venue:
Operations Research Letters
Year:
2007

Citing 7
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Abstract

We consider the problem of optimally acquiring and retiring assets that are undergoing technological change over an unbounded horizon. Assuming discounted future per-period acquisition and maintenance costs go to zero, while total discounted costs diverge to infinity, we show that efficient solutions exist and are overtaking optimal.