Abstract
Suppose a problem of determining whether the replacement of old equipment is economical or not when new equipment with technological advances is expected to appear at each period of the equipment planning interval. Since equipment always keeps in danger of obsolescence under technological advances, the decision maker needs grasp the state of obsolescence constantly to reflect it adaptively in the present and future decisions. Especially the decision to replace now or not becomes urgent in most cases and he is much concerned with the present decision. At this time he must also consider the fact that the present decision depends on the subsequent future decisions. This paper derives a simple criterion by which it becomes easily possible in some circumstances to decide whether immediate replacement is economical or not without determining the subsequent sequence of replacement times for the planning interval. Some informations on next replacement time are presented by parametric analysis of the criterion and the upper bound number of replacement times is given for the interval. These will become a guideline for the decision maker to plan future equipment replacement. The proposed method is applied to a practical case and some characteristics are examined by sensitivity analysis. It is clarified that the method is relatively insensitive to changes of parameters at the present decision.
