Technological breakthroughs and asset replacement

Yuri Yatsenko and Natali Hritonenko
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Natali Hritonenko: ---

No 2008074, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: The authors analyze the optimal replacement of assets under continuous and discontinuous technological change. They investigate the variable lifetime of assets in an infinite-horizon replacement problem. Due to deterioration, the maintenance cost increases when the asset becomes older. Because of technological change, both maintenance and new capital costs decrease for a fixed asset age. The dynamics of the optimal lifetime is investigated analytically and numerically under technological change in the cases of one and several technological breakthroughs. It is shown that the breakthroughs cause irregularities (anticipation echoes) in the asset lifetime before the breakthrough time.

Keywords: asset replacement; technological change; optimal lifetime; anticipation echoes. (search for similar items in EconPapers)
JEL-codes: C61 L23 O14 O33 (search for similar items in EconPapers)
Date: 2008-12-01
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Working Paper: Technological breakthroughs and asset replacement (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2008074

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