Parallel Replacement under Capital Rationing Constraints

Nejat Karabakal, Jack R. Lohmann and James C. Bean
Additional contact information
Nejat Karabakal: Faculty of Business Administration, Bilkent University, 06533 Bilkent, Ankara, Turkey
Jack R. Lohmann: School of Industrial and Systems Engineering, Georgia Institute of Technology, Atlanta, Georgia 30332
James C. Bean: Department of Industrial and Operations Engineering, The University of Michigan, Ann Arbor, Michigan 48109

Management Science, 1994, vol. 40, issue 3, 305-319

Abstract: Contrary to serial replacement, parallel replacement problems require a decision maker to evaluate a portfolio of replacement decisions in each time period because of economic interdependencies among assets. In this paper, we describe a parallel replacement problem in which the economic interdependence among assets is caused by capital rationing. The research was motivated by the experience gained from a vehicle fleet replacement study where solutions to serial replacement problems could not be implemented since they violated management's budget plan. When firms use budgets to control their expenditures, competition for the limited funds creates interdependent problems. In this paper, we formulate the problem as a zero-one integer program and develop a branch-and-bound algorithm based on Lagrangian relaxation methodology. A multiplier adjustment method is developed to solve one Lagrangian dual.

Keywords: equipment replacement; capital rationing; integer programming; Lagrangian relaxation; multiplier adjustment method (search for similar items in EconPapers)
Date: 1994
References: Add references at CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.40.3.305 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:40:y:1994:i:3:p:305-319

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().