This Table indicates that rather unrealistic increases in automobile service life would be required to offset rising repair costs. Methods for reducing repair costs must clearly be sought. Figure 6 is a graphic representation of this example.

b. Home Appliances

There were not sufficient data available to permit development of survival curves for various home appliance products. However, an economic analysis similar to that for automobiles could be made.

The increase in repair costs for major home appliances since 1967 has been on the order of 47% while acquisition costs have only risen by 5%. The percentage increase in mean life required to maintain 1967 annualized aggregate costs can be tabulated assuming an average repair cost per year of 6% of the acquisition cost. As above,

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let R be the 1967 average repair cost per year and

Ca the acquisition cost.

If A is the 1967 mean ser

vice life we can find the regional mean service life

A1 in 1973 required to keep annualized aggregate costs

From the Table and previous discussion, it is apparent that a new appliance bought in 1973 must have at least a 33 percent greater life than a 1967 appliance in order

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to have the same annualized aggregate cost. Figure 7

Estimates of average construction equipment life, as tabulated in Table 5 for selected types of equipment, show that the average service life of 7.6 years is somewhat lower than the 9.7 years estimated for automobiles. However, the percentage of acquisition cost corresponding to annual repair costs is almost twice that for automobiles. A tractor-scraper, for example, has an acquisition cost of about $60,000 and maintenance

repair cost estimated to be about $10,200 per year resulting in an annual maintenance-repair cost amounting to 17% of acquisition cost.

If R, Ca and A are defined as before and it is assumed that construction equipment repair costs have risen 36% since 1968 while acquisition costs have only risen 11% as in the case of automobiles, then letting R = (.17)Ca we obtain the following Table:

TO MAINTAIN 1967 ANNUALIZED AGGREGATE COSTS
PERCENT INCREASE IN MEAN SERVICE LIFE REQUIRED

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2.2.4 Future Analytic Development

It seems clear from the above analyses that repair
costs and repair frequency of consumer products need
to be investigated more intensively. Given actuarial
type data relating numbers and cost of repair of con-
sumer products, a quantitative evaluation of the ex-
pected number of repairs as a function of equipment
age could be made. If we knew the cumulative cost of
repair for equipment aged T years, say C(T), then the
annualized aggregate cost for equipment replaced at
age T would be

C(T) + Ca

T

where C, is the acquisition cost. The minimizing value of

a

this expression with respect to T, say To, would represent the optimum age at which to replace the equipment. This could be calculated as a function of changing repair costs and improved product durability. For example, if the average repair cost per hour (R) is constant and the time between repairs can be described by a Weibull distribution, then the annualized aggregate cost for time interval [0,T] is