Age Replacement With Adjustment and Depreciation Costs and Interest Charge

Abstract

The age replacement policy which minimizes the average expected cost per unit time over an infinite time span is obtained in the case where the cost structure involves a term which takes into account adjustment costs, depreciation costs or interest charges which are suffered at fixed intervals of time of equal length. The optimal policy is shown to be nonrandom and sufficient conditions are given for it to be finite. Stopping rules in the search of this finite solution are also given. Finally some examples illustrate the procedure of finding these optimal policies.