Rational expectations as a tool for predicting failure of weighted k-out-of-n reliability systems

Jørgen Vitting Andersen (), Roy Cerqueti and Jessica Riccioni
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Jørgen Vitting Andersen: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CNRS - Centre National de la Recherche Scientifique
Roy Cerqueti: UNIROMA - Università degli Studi di Roma "La Sapienza" = Sapienza University [Rome], LSBU - London South Bank University
Jessica Riccioni: UNIROMA - Università degli Studi di Roma "La Sapienza" = Sapienza University [Rome]

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Abstract: Here we introduce the idea of using rational expectations, a core concept in economics and finance, as a tool to predict the optimal failure time for a wide class of weighted k-out-of-n reliability systems. We illustrate the concept by applying it to systems which have components with heterogeneous failure times. Depending on the heterogeneous distributions of component failure, we find different measures to be optimal for predicting the failure time of the total system. We give examples of how, as a given system deteriorates over time, one can issue different optimal predictions of system failure by choosing among a set of time-dependent measures.

Keywords: Physics and Society; Data Analysis; Statistics and Probability; General Finance; Physical sciences; Economics and business; Rational expectations; weighted k-out-of-n reliability systems; failure prediction; statistical measures (search for similar items in EconPapers)
Date: 2023-04-17
New Economics Papers: this item is included in nep-rmg
Note: View the original document on HAL open archive server: https://hal.science/hal-03634370v1
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Published in Annals of Operations Research, 2023, 326 (2023), pp.295-316. ⟨10.1007/s10479-023-05300-x⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-03634370

DOI: 10.1007/s10479-023-05300-x

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