Timing replacement decisions under discontinuous technological change

We consider the problem of deciding whether to keep a piece of equipment or replace it with a more advanced technology in an environment of technological change. Our model assumes that the costs associated with the presently available technology and future technologies are known, but that the appearance times of future technologies are uncertain. We develop a procedure for computing the optimal keep-or-replace decision that iteratively incorporates a technological forecast. For a certain class of situations, we show that our approach requires the minimum possible amount of forecasted data.     

Establishing Reliability Goals for Naval Major-Caliber Ammunition

We describe a decision process for establishing the threshold reliabilities for components of naval major-caliber ammunition. We present a measure of reliability performance, called ef*, which relates directly to the weapons system's performance in a naval gunfire support environment. We use a simulation model to establish this relationship, a regression metamodel to estimate its parameters, and a simple decision process to specify component reliability thresholds which ensure that the ammunition is mission effective. We present this article as an example of the integration of discrete event dynamic system analysis within a decision process. © 1992 John Wiley & Sons, Inc.     

“Disarmament Market” Effects of Information Disclosures

In yet another wave of discussion on nuclear disarmament among political scientists and practitioners, one of the topical issues concerns the problem of transparency, its mechanisms, costs, and benefits. Numerous—though often abstract—calls for greater transparency of nuclear arsenals and postures when promoting the idea of nuclear disarmament, however, do not give a clear rationale for states possessing nuclear weapons to pursue greater transparency. Meanwhile, many other research fields—such as economics and psychology—attempt to address problems related to the lack of exact information on the counterpart's activities and intentions. Economics offers one probable analog for the transparency problem: the issue of information asymmetry and its consequences. This article is an attempt to apply the classical model of a market with information asymmetry to the analysis of the transparency problem within the nuclear disarmament process. Such an approach could help pave the way for closer cooperation between economic and political scientists in the nuclear disarmament field.     

A risk function for the stochastic modeling of electric capacity expansion

We present a stochastic optimization model for planning capacity expansion under capacity deterioration and demand uncertainty. The paper focuses on the electric sector, although the methodology can be used in other applications. The goals of the model are deciding which energy types must be installed, and when. Another goal is providing an initial generation plan for short periods of the planning horizon that might be adequately modified in real time assuming penalties in the operation cost. Uncertainty is modeled under the assumption that the demand is a random vector. The cost of the risk associated with decisions that may need some tuning in the future is included in the objective function. The proposed scheme to solve the nonlinear stochastic optimization model is Generalized Benders' decomposition. We also exploit the Benders' subproblem structure to solve it efficiently. Computational results for moderate‐size problems are presented along with comparison to a general‐purpose nonlinear optimization package. © 2001 John Wiley & Sons, Inc. Naval Research Logistics 48:662–683, 2001