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Stochastic optimization approach of car value depreciation

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  • Bader Alshamary
  • Ovidiu Calin

Abstract

This paper presents a stochastic model for a car's value and its depreciation under random repairs modeled by a Poisson process; the usage functional is defined, and the optimal selling time is estimated. Exact or approximative formulas are provided where possible. The car's value is evaluated as an asset with negative return and paying random normally distributed dividends at stochastic times, which are Erlang distributed. Copyright © 2012 John Wiley & Sons, Ltd.

Suggested Citation

  • Bader Alshamary & Ovidiu Calin, 2013. "Stochastic optimization approach of car value depreciation," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 29(3), pages 208-223, May.
    • Handle: RePEc:wly:apsmbi:v:29:y:2013:i:3:p:208-223
    DOI: 10.1002/asmb.1911
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    Cited by:

    1. Dumortier, Jerome & Siddiki, Saba & Carley, Sanya & Cisney, Joshua & Krause, Rachel M. & Lane, Bradley W. & Rupp, John A. & Graham, John D., 2015. "Effects of providing total cost of ownership information on consumers’ intent to purchase a hybrid or plug-in electric vehicle," Transportation Research Part A: Policy and Practice, Elsevier, vol. 72(C), pages 71-86.
    2. Dumortier, Jerome & Siddiki, Saba & Carley, Sanya & Cisney, Joshua & Krause, Rachel & Lane, Bradley & Rupp, John & Graham, John, 2015. "Effects of Life Cycle Cost Information Disclosure on the Purchase Decision of Hybrid and Plug-In Vehicles," IU SPEA AgEcon Papers 198643, Indiana University, IU School of Public and Environmental Affairs.

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