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Optimal Replacement Policies for Rejuvenated Assets
Author(s) -
McClelland John W.,
Wetzstein Micheal E.,
Noles Richard K.
Publication year - 1989
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1241783
Subject(s) - asset (computer security) , economics , rotation (mathematics) , sensitivity (control systems) , rejuvenation , joins , microeconomics , mathematical economics , computer science , mathematical optimization , mathematics , engineering , biology , computer security , electronic engineering , artificial intelligence , genetics , programming language
The Faustmann‐Samuelson solution for optimal asset rotation is extended to consider both asset rejuvenation and nonconstant prices. A dynamic theoretical model is developed in terms of an optimal control problem with discontinuous control variables, and numerical solution procedures are outlined. The model is applied to layer hen replacement where hen rejuvenation by forced molting is a common industrial practice. Results indicate a sensitivity between the decision to rejuvenate or replace a hen and the egg price cycle, suggesting a mixed rotation strategy.