Technological breakthroughs and asset replacement

Yatsenko, Yuri;Hritonenko, Natali
(2008) , 25 pages

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Authors
  • Yatsenko, YuriHouston Baptist University
    Author
  • Hritonenko, NataliPrairie View A and M University
    Author
Abstract
The authors analyze the optimal replacement of assets under continuous and discontinuous technological change. They investigate the variable lifetime of assets in an infinite-horizon replacement problem. Due to deterioration, the maintenance cost increases when the asset becomes older. Because of technological change, both maintenance and new capital costs decrease for a fixed asset age. The dynamics of the optimal lifetime is investigated analytically and numerically under technological change in the cases of one and several technological breakthroughs. It is shown that the breakthroughs cause irregularities (anticipation echoes) in the asset lifetime before the breakthrough time.
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Yatsenko, Y., & Hritonenko, N. (2008). Technological breakthroughs and asset replacement (CORE Discussion Papers 2008/74). https://hdl.handle.net/2078.5/249794