A deterministic economic model of optimal asset scrapping under the effects of taxes and inflation

Nattawoot Koowattanatianchai, Michael B. Charles and Michael A. Kortt

The Engineering Economist, 2024, vol. 69, issue 1, 2-36

Abstract: This study investigates optimal asset scrapping conditions under taxation and inflation by adjusting Koowattanatianchai and Charles’s (2015) model on optimal asset duration, which omits the scrapping problem. We decompose the overall effects of taxation and inflation on the optimal scrapping policy into direct and indirect effects via the discount rate, and find that contradictory results in the existing literature of asset scrapping are all correct since they are compartments of our generalized framework. Simulation analysis is also conducted using the Thai logistics industry, with the results confirming the properties of the developed model and highlighting the importance of inflation and taxation in the surrounding economic context.

Date: 2024
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DOI: 10.1080/0013791X.2024.2314310

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