TABLE OF CONTENTS 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.
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.
The chapter is organized as follows: Section 6.2 argues for an augmented perspective on engineering design and optimization, as a prerequisite for addressing the durability choice...
