Technological breakthroughs and asset replacement

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.asset replacement, technological change, optimal lifetime, anticipation echoes.

Impact of maintenance on replacement investment under technological improvement

International audienceAn unexplored important area in the equipment investment problem under technological improvement is the impact of maintenance policy. In fact, maintenance not only helps to maximize the profitability of the asset, but also prolong its economic life while waiting the apparition of better technology in the near future. Therefore, we propose a model that allows us to consider how replacement investment in a new or improved asset will be influenced by maintenance. The investment decisions are based on information about the profitability of the current asset and the technological environment. For the maintenance process, we also consider the dependency of its cost and efficiency on the deterioration state of asset that is represented by a profit parameter. We use a non-stationary Markov decision process to solve for the optimal investment/maintenance policy and illustrate the potential benefits of integrating maintenance policies in the investment strategy through different numerical analysis

Optimal maintenance and replacement decisions under technological change with consideration of spare parts inventories

International audienceClassical spare parts inventory models assume that the same vintage of technology will be utilized throughout the planning horizon. However, replacement often occurs in the form of a new technology that renders existing spare parts inventories obsolete. This paper aims to study the impact of spare parts inventory on maintenance and replacement decisions under technological change via a Markov decision process formulation. The replacement decision is complex in that one must decide with which technology available on the market to replace the current asset. Under technological change, the do nothing and repair options have significantly more value as they allow the appearance of even better technologies in the future

The dynamics of asset lifetime under technological change

The variable lifetime of assets is analyzed in a serial replacement problem. Technological change impacts the maintenance cost and new asset cost. The optimal asset lifetime appears to be constant only when both costs decrease with the same rate. We identify cases when the technological change decreases or increases the optimal lifetime. © 2008 Elsevier B.V. All rights reserved