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6 - Durability Choice and Optimal Design Lifetime for Complex Engineering Systems

Published online by Cambridge University Press:  25 October 2009

Joseph H. Saleh
Joseph H. Saleh
Affiliation:
Georgia Institute of Technology
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Summary

PREVIEW AND GUIDE TO THE CHAPTER

This chapter addresses the durability choice problem for complex engineering systems, as seen from the customer's perspective and in the face of network externalities and obsolescence effects. Economists have investigated the impact of market structure on manufacturers' durability choices (under monopolistic or competitive market conditions); this chapter departs from the literature on the subject by addressing the durability choice problem from the customer's perspective, and an “optimal” durability is sought that maximizes the NPV of an asset for the customer (as opposed to maximizing the profits of the manufacturer). First, the various qualitative implications for reducing or extending a product's durability are discussed. Second, analytical results for the optimal durability are derived under steady-state and deterministic assumptions. Trends and functional dependence of the optimal durability on various parameters are identified and discussed. Third, the durability choice problem is explored when the risk of obsolescence is accounted for. Finally, the durability choice problem under uncertainty is investigated and the various risks in making cautious or risky choices of durability are discussed.

Introduction: A Topic Overlooked by Economists and Engineers

The objective of this chapter is to contribute an analytical framework toward the rational choice of durability for engineering systems, as seen from a customer's perspective, and in the face of network externalities and obsolescence effects.

Type
Chapter
Information
Analyses for Durability and System Design Lifetime
A Multidisciplinary Approach
 , pp. 101 - 127
Publisher: Cambridge University Press
Print publication year: 2007

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