INTRODUCTION In order to secure the services of durables at minimum cost, producers and consumers confront invariably the question: How frequently should a stock of old durables be replaced by a stock of new ones? Clearly, the old durables should not be replaced too soon because the cost of acquiring them will occur too frequently and this will raise the unit cost of their services. However, the durables should not be replaced too late either, because their rising operating costs and the higher productivity of durables of newer vintages render them economically inferior. So, to tackle the issues involved in determining the optimal life of durables, researchers in the fields of management and economics have adopted over the years various approaches. The terms capital, equipment, and have been employed frequently in the relevant literature to indicate that the good under consideration has the properties of a producer's durable. In this paper, we use these terms interchangeably. The same comment holds also for service life, and lifetime. Preinreich (1940) was the first to show how the optimal life of durables can be determined. More specifically, according to his theorem, the optimal economic life of a single machine should be computed together with the economic life of each machine in the chain of future replacements extending as far into the future as the owner's profit horizon. However, the theorem was formulated under two crucial assumptions. The first of them abstracted from a technological progress and postulated that newer machines of identical type replaced older machines (like-forlike). This assumption contradicted casual observations and was ultimately relaxed by Smith (1961) who generalized the above result of Preinreich (1940) to the case where the older machines were replaced by more productive machines embodying the most recent advances in science and technology. The second assumption concerned the horizon of the reinvestment process and required the owner of the machine to choose its duration on the basis of their perception on how long the investment opportunity might remain profitable. Later, depending on the specification of the owner's profit horizon, different models emerged for the determination of the optimal lifetime of assets. In particular, by limiting the owner's profit horizon to a single investment cycle, researchers in the field of capital budgeting obtained the so-called class of models and used it to derive strict rules regarding the optimal asset life. Initially, Robichek and Van Horne (1967) suggested that an asset should be abandoned during any period, in which the present value of future cash flows did not exceed its abandonment value. Then, based on the possibility that the function of cash flows might not have a single peak, Dyl and Long (1969) argued that abandonment should not occur at the earliest possible date that the above abandonment condition was satisfied, but rather at the date that yielded the highest net present value over all future abandonment opportunities. Later, Howe and McCabe (1983) highlighted the patterns of cash flows and scrap values under which the model led to a unique global optimum of the abandonment time. They also characterized the complete range of models that could be obtained by varying the owner's profit horizon and clarified the practical guidelines for the choice between and models. Theoretical economists, on the other hand, continued to work in the tradition of Terborgh (1949) and Smith (1961) by assuming invariably that the owner's profit horizon is infinite. This in turn led them to concentrating on a single class of replacement models, all of which presumed that the infinite reinvestments took place at equal time intervals. This pervasive conceptualization was adopted in all significant contributions in the area from Brems (1968) to Nickel (1975), Rust (1987) and to Mauer and Ott (1995). …