Characterization of optimal policy for capital replacement models

Characterization of optimal policy for capital replacement models

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Article ID: iaor20073553
Country: United Kingdom
Volume: 13
Issue: 4
Start Page Number: 261
End Page Number: 271
Publication Date: Oct 2002
Journal: IMA Journal of Management Mathematics (Print)
Authors: ,
Keywords: financial
Abstract:

The behaviour of simple replacement decision models is described. We compare and contrast the fixed planning horizon model with the variable planning horizon model, and relate both of these to the classic economic life model. We show that the models are equivalent under certain circumstances. We give recommendations for choosing between these models in practical applications.

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