How old is too old? An economic approach to replacing military aircraft

Victoria Greenfield and David Persselin

Defence and Peace Economics, 2003, vol. 14, issue 5, 357-368

Abstract: The US Air Force is asking when to replace its aging aircraft. We develop a framework to identify economically optimal replacement strategies that recognizes cost trade-offs and incorporates age effects. We also preview a stochastic methodology. We use the framework to identify an optimal strategy, defined by the replacement age, for a generic fleet and conduct a sensitivity analysis. Quantitative illustrations show that the range of strategies that provides close-to-optimal outcomes widens as the operating and support (O&S) cost growth rate decreases and the ratio of the acquisition price to the initial O&S cost increases. A wider range implies more decision-making leeway.

Keywords: Aging Aircraft; Capital Investment; Optimal Replacement; Dynamic Programming; Military Equipment; Uncertainty (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (2)

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DOI: 10.1080/10242690302926

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