Durability choice and optimal design lifetime for complex engineering systems

Abstract

This paper addresses the durability choice problem of 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 choice (under monopolistic or competitive market conditions); this paper 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 maximises the Net Present Value of an asset for the customer (as opposed to maximising the profits of the manufacturer). First, the various qualitative implications for reducing or extending a system'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. This paper contributes an analytical framework towards a (customer's) rational choice of durability. The analyses here provided should be made available to systems engineers and decision-makers to support in part the durability specification of engineering systems.