American Institute of Mathematical Sciences

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October  2005, 1(4): 415-432. doi: 10.3934/jimo.2005.1.415

Optimization of the lifetime of capital equipment using integral models

Yuri Yatsenko 1, and  Natali Hritonenko 2,

1. 

College of Business and Economics, Houston Baptist University, 7502 Fondren Road, Houston, TX 77074-3298, United States
2. 

Department of Mathematics, Prairie View A{\&}M University, P.O. Box 4189, Prairie View, TX 77446-4189, United States

Received  February 2005 Revised  September 2005 Published  October 2005

In Operations Research, the equipment replacement process is usually modeled as a discrete sequential decision problem. The alternative approach is developed in vintage capital models, which explicitly involve the lifetime of capital equipment and are described by the integral equations of a special type. The paper exposes a general investigation framework for the optimal control of the integral models with endogenous lags, which is applied to meaningful one- and two-sector vintage models. The analysis leads to nontrivial results such as turnpike properties of the optimal equipment lifetime and corresponding management strategies of equipment replacement.
Keywords: vintage capital, Optimization, capital lifetime, turnpike theorems..
Mathematics Subject Classification: Primary: 45D05, 91B62; Secondary: 49J2.
Citation: Yuri Yatsenko, Natali Hritonenko. Optimization of the lifetime of capital equipment using integral models. Journal of Industrial & Management Optimization, 2005, 1 (4) : 415-432. doi: 10.3934/jimo.2005.1.415
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