Abstract:We consider an operator of machinery with deteriorating efficiency, facing the problem of optimally timing of either a minor (maintenance) investment or a major (replacement) investment under price uncertainty. If a maintenance investment is chosen, the efficiency of the machinery will deteriorate more slowly, and replacing later is still possible. The optimal decision rule is expressed in the form of thresholds for long-run prices, indicating that it may be rational to wait to see which of the large and small… Show more
Set email alert for when this publication receives citations?
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.