APPLICATIONS OF CAPITAL REPLACEMENT MODELS WITH FINITE PLANNING-HORIZONS

Capital replacement models with finite planning horizons can be used t o model replacement policies in complex operational contexts. They may also be used to investigate the cost consequences of technological ch ange. This paper reviews the application of these models in various su ch contexts. We also compare fixed planning horizon models with variab le planning horizon models. As technological change, and hence the req uirement of users and customers, often drives replacement decisions ra ther than cost optimality, the modelling focuses not only on obtaining optimal policies, but also on determining the increased cost of sub-o ptimal policies. The role of penalty cost formulations is also discuss ed. These ideas are illustrated using a number of case histories from medicine and transport.