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A Stochastic Asset Replacement Model for Rejuvenated Assets

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  • G. Scott Smith
  • Michael E. Wetzstein

Abstract

Stochastic returns generated by a productive asset are investigated for the replacement problem with rejuvenation. Optimal replacement and rejuvenation conditions, given collinearities among multiple outputs, are considered for alternative levels of producer risk preference. This methodology is applied to a laying hen replacement problem. Results indicate that risk-averse producers should consider less rejuvenation and shorter rejuvenation production periods. Also, replacement decisions should occur later in the year for peak production to coincide with high output prices.

Suggested Citation

  • G. Scott Smith & Michael E. Wetzstein, 1992. "A Stochastic Asset Replacement Model for Rejuvenated Assets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(2), pages 378-387.
    • Handle: RePEc:oup:ajagec:v:74:y:1992:i:2:p:378-387.
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    File URL: http://hdl.handle.net/10.2307/1242492
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    Cited by:

    1. Stutzman, Sarah & Weiland, Brandon & Preckel, Paul & Wetzstein, Michael, 2017. "Optimal replacement policies for an uncertain rejuvenated asset," International Journal of Production Economics, Elsevier, vol. 185(C), pages 21-33.
    2. Weiland, Brandon & Sesmero, Juan Pablo & Preckel, Paul & Wetzstein, Michael E., 2017. "Can Wood Pellets Save Coal?," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258250, Agricultural and Applied Economics Association.

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