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2007•Munich Personal RePEc Archive (Ludwig Maximilian University of Munich)Requires access

Investment, replacement and scrapping in a vintage capital model with embodied technological change

George C. Bitros, Natali Hritonenko, Yuri Yatsenko

Open publisher page 5 citations

Abstract

This paper analyzes and compares two alternative policies of determining the service life and replacement demand for vintage equipment under embodied technological change. The policies are the infinite-horizon replacement and the transitory replacement ending with scrapping. The corresponding vintage capital models are formulated in the dynamic optimization framework. These two approaches lead to different estimates of the duration of replacements and the impact of technological change on the equipment service life.

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What this paper is about

This paper analyzes and compares two alternative policies of determining the service life and replacement demand for vintage equipment under embodied technological change. The policies are the infinite-horizon replacement and the transitory replacement ending with scrapping. The corresponding vintage capital models are formulated in the dynamic optimization framework. These two approaches lead to different estimates of the duration of replacements and the impact of technological change on the equipment service life.

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Available abstract

This paper analyzes and compares two alternative policies of determining the service life and replacement demand for vintage equipment under embodied technological change. The policies are the infinite-horizon replacement and the transitory replacement ending with scrapping. The corresponding vintage capital models are formulated in the dynamic optimization framework. These two approaches lead to different estimates of the duration of replacements and the impact of technological change on the equipment service life.

Key concepts: Vintage, Technological change, Investment (military), Capital (architecture), Economics, Duration (music), Service (business), Capital investment

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