On Optimal Replacement Thresholds with Technological Expectations
نویسنده
چکیده
Y. Balcer and S. A. Lippman (1984, J. Econ. Theory 34, 292 318) develop a model to analyze the ``buy or wait'' problem under technological change. They show that this dynamic problem has a threshold solution: if the difference between the best available technology and that currently held exceeds a certain threshold, then buy. They also claim that the threshold is increasing in the ``discovery potential.'' That is, the faster the technology is changing, the higher the threshold. In this note, we point out an error in the proof of that theorem and further, we provide a numerical counterexample to the claim. Journal of Economic Literature Classification Numbers: O32, O33. 1999 Academic Press
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