A paradox in equipment replacement under technological improvement |
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| Authors: | Torpong CheevaprawatdomrongRobert L. Smith |
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| Affiliation: | Department of Industrial and Operations Engineering, The University of Michigan, Ann Arbor, MI 48109, USA |
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| Abstract: | It is commonly assumed that an acceleration in technological improvement should result in a more rapid introduction of new technology. Under a simple technological change model of a constant factor improvement in equipment costs per period, we show that, paradoxically, the effect is to optimally delay the introduction of new technology. |
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| Keywords: | Equipment replacement Technological change Adoption of new technology Infinite horizon optimization |
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