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The parameters , and a are determined by the failure

characteristics of the equipment.

In addition, the airlines have developed a sophisticated actuarial method for analyzing aircraft equipment repair data. This technique applied to consumer equipment repa ir data would provide the necessary mathematical models

for determining whether in fact rising repair costs are causing products to be discarded before termination of

useful life.



This Section presents the policy considerations inherent in attempting to increase the salvage value of various consumer products through legislative and administrative means.

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Salvage value is not used in this report in the same

sense as it appears in traditional accounting concepts or
in regulations of the Internal Revenue Service regarding
permissible rates of capital depreciation. In that context,

salvage value is an arithmetic residual figure, and represents an arbitrary value assigned to an item after it has

been fully depreciated. It is intended to reflect the

economic value of the depreciated item, but in fact may be a figure nowhere approximating an item's true economic


Salvage value as used in this report means the value

assigned by the marketplace to an item at the end of its

useful primary life at the end of its physical ability to fulfill the purposes for which it was originally purchased.

Salvage value is thus a concept which occurs once an item is

beyond rehabilitation for use by either normal maintenance

methods, or by ordinary repairs. It is the economic value

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of the item at that precise point in time. Salvage value

will thus be a reflection of the following potential uses

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It may be that an item will have economic value result

ing from more than one of the above uses; i.e., that it has

value both as a potential raw material and as an item capable of being rebuilt. It is assumed for the purposes of this re

port that the salvage value is the highest value of the item

resulting from its potential uses.

Thus the price of a par

ticular salvage-use of an item is assumed to be a true re

flection of its present utility to the economy. Hence any attempt to increase the price or salvage value of an item is

assumed to be an attempt to increase the utility of the item


As discussed below, there are various alternative

legislative and administrative approaches through which the over-all utility of a particular salvage-item can be increased, ranging from increasing the ease with which

spent items can be transported throughout regions of the country to altering the physical composition of an item

to insure its maximal use as a raw material in other in

dustrial processes. Whether or not, and to what extent it is feasible to attempt to increase the salvage value of a class of items, however, is itself a judgment

which must take into account a variety of other and per

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the economy, and on consequent uses of raw materials,

energy and disposal facilities

the effect of product efficiency on the use of avail


able energy supplies

the impact of the production-use-disposal cycle of


the item on the long-run availablity of virgin raw

materials and natural resources

the efficiency of diverting available capital and
labor resources to processes which attempt to increase

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It is not entirely clear that measures which would tend

to maximize salvage value would automatically result in

the highest overall utility to the economy and to society.

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