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IE grad student charts a dynamic course in economic replacement analysis

They may not call it by that name, but consumers engage in single-asset replacement analysis every time they consider making or putting off a major purchase.

How long will the old car last and how many repairs will it need before it is replaced? How much does a new car cost now and how much might it cost in one year? These are some of the questions involved in replacement analysis.

Jennifer Rogers, a Ph.D. candidate in industrial engineering, studies economic replacement analysis as it affects capital assets that are subject to technological improvements.

Jennifer uses dynamic programming to develop models that determine economic replacement schedules for assets undergoing improvements either gradually over discrete periods of time, or in quantum leaps because of technological breakthroughs.

“Up until now,” says Jennifer, “most models have considered either the continuous or discontinuous improvement scenario. We’re trying to combine the two models.”

Jennifer has a scholarship through Lehigh’s Integrative Graduate Education and Research Training program. Funded by the National Science Foundation, IGERT is a collaboration between Lehigh’s department of industrial and systems engineering and the University of Pennsylvania’s Wharton School of Business that trains international leaders in manufacturing logistics.

IGERT fellows receive a full tuition waiver, a stipend and educational expenses to cover an industrial internship in the U.S. and a second internship at an IGERT-affiliated institution in Europe, Asia, Australia or the Middle East.

Jennifer spent the fall of 2004 working on her research project at the University of Edinburgh in Scotland.

A breakthrough in technology, she says, can result not only in higher purchase prices but also in lower operating and maintenance costs, pushing overall costs lower. Similarly, the expense of a new family car might be offset by lower repair bills and higher gas mileage.

Not all uncertainties are equal. A major boost in product quality by an auto company seeking to stay competitive is easier to predict than an improvement resulting from a breakthrough in lab research.

“Our work is fairly general,” says Jennifer. “We want to develop a model with both continuous and discontinuous technological change, while considering that it is not known when a big jump in the quality of a product might occur.”

Jennifer works with Prof. Joseph Hartman, national editor of The Engineering Economist, who has a CAREER Award from NSF to study replacement analysis.

In the spring of 2004, at an IIE (Institute of Industrial Engineers) conference in Houston, Jennifer presented a paper she co-wrote with Hartman.

While studying in Scotland, Jennifer traveled to London and to Nice, France, and took a boat tour of the Loch Ness. But her favorite locale was the Royal Museum of Scotland, a huge museum with wings for science, natural history, pop culture and more that is located adjacent to Edinburgh University.

After she completes her Ph.D. in the spring of 2005, Jennifer hopes to become a college professor, teaching and doing research in industrial and systems engineering.

Posted on Tuesday, June 01, 2004

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