In this paper, we introduce adoption costs in a canonical vintage capital model. Adoption costs take the form of a direct loss in production during a fixed period of time. We explicitly characterize the optimal machine replacement policy as a function of the adoption period. Using an explicit...

We construct a two-sector vintage capital model with neutral and investment-specific technical progress and variable utilization of each vintage. The lifetime of capital goods is endogenous and it relies on the associated maintenance costs. First, we show that the lifetime of capital is an...