Hostname: page-component-cd9895bd7-7cvxr Total loading time: 0 Render date: 2024-12-26T04:21:24.741Z Has data issue: false hasContentIssue false
  • English
  • Français

Theoretical and Empirical Problems in Modeling Optimal Replacement of Farm Machines

Published online by Cambridge University Press:  28 April 2015

Garnett Bradford  and
Donald Reid
Garnett Bradford
Affiliation:
University of Kentucky, Lexington
Donald Reid
Affiliation:
University of Kentucky, Lexington
Get access Rights & Permissions [Opens in a new window]

Extract

Research on the optimal replacement problem has emphasized specification of the theoretically appropriate criterion. Today, the most commonly applied replacement decision theory for machinery assumes that the owner will replace each older machine, “defender,” with an identical new machine, “challenger,” in accordance with long-run cost minimizing or profit maximizing criteria (i.e., wealth maximization). Perrin (p. 60) summarizes the cost minimization criterion which should be applied: “A machine should be kept another period if the marginal costs of retaining it … are less than the ‘average’ periodic costs of a replacement machine.” As Chisholm noted, this criterion is “deceptively simple.” Support for Chisholm's observation is evidenced throughout the literature, because acceptance and use of an appropriate criterion has come about slowly.

Type
Research Article
Information
Journal of Agricultural and Applied Economics , Volume 14 , Issue 1 , July 1982 , pp. 109 - 116
Copyright
Copyright © Southern Agricultural Economics Association 1982

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

American Society of Agricultural Engineers. Agricultural Engineers Yearbook. St. Joseph, Missouri (1976, 1979).Google Scholar
Bates, J. M., Rayner, A. J., and Custance, P. R.. “Inflation and Farm Tractor Replacement in the U.S.: A Simulation Model.” Amer. J. Agr. Econ. 61(1979):331–34.CrossRefGoogle Scholar
Boehlje, Michael G. and Kelley White, T.. “A Production-Investment Decision Model of Farm Firm Growth.” Amer. J. Agr. Econ. 51(1969):546–64.CrossRefGoogle Scholar
Boulding, K. E.Economic Analysis, Volume 1: Microeconomics. New York: Harper & Bros., 1966.Google Scholar
Chisholm, Anthony H. “Criteria for Determining the Optimum Replacement Pattern.” Amer. J. Agr. Econ. 48(1966): 107–12.Google Scholar
Crâne, Donald R. Jr. and Spreen, Thomas H.. “A Model of the Stubble Replacement Decision for Florida Sugarcane Growers.” S. J. Agr. Econ. 12(1980):55–64.Google Scholar
Fans, J. Edwin. “Analytical Techniques Used in Determining the Optimum Replacement Pattern.” J. Farm Econ. 42(1960):755–66.Google Scholar
Fisher, I.The Theory of Interest. New York: Macmillan, 1930.Google Scholar
Ho telling, H. “A Generalized Mathematical Theory of Depreciation.” J. Amer. Statist. Assoc. 20 (1925):340–53.CrossRefGoogle Scholar
Hunt, Donnell. Farm Power and Machinery Management. Ames: Iowa State University Press, 1977.Google Scholar
Kay, Ronald D. and Rister, Edward. “Effects of Tax Depreciation Policy and Investment Incentives on Optimal Equipment Replacement Decisions: Comment.” Amer. J. Agr. Econ. 58(1976):355–58.CrossRefGoogle Scholar
McNeill, Roger C. “Depreciation of Farm Tractors in British Columbia.” Can. J. Agr. Econ. 27 (1979):53–58.CrossRefGoogle Scholar
Peacock, David L. and Brake, John R.. What is Used Farm Machinery Worth? Michigan State University, Agr. Exp. Sta. Res. Rep. No. 109, March 1970.Google Scholar
Perrin, R. K. “Asset Replacement Principles.” Amer. J. Agr. Econ. 54(1972):60–67.CrossRefGoogle Scholar
Samuelson, Paul A. “Economics of Forestry in an Evolving Society.” Econ. Inquiry 14(1976):466–92.CrossRefGoogle Scholar
Watts, Myles J. and Helmers, Glenn A.. “Inflation and Machinery Cost Budgeting.” S. J. Agr. Econ. 11(1979):83–88.Google Scholar