Causes and effects of FDI by the Norwegian maritime industry

A theory of replacement in the context of ocean going vessels is discussed. The approach is based upon costs rather than profits, and while there appear to be many difficulties in applying replacement theory to ships it is shown that there are some segments where the theory can still usefully be applied. The effect on replacement resulting from varying important cost parameters is shown and it is found that while fiscal measures have very little effect, capital cost and operating cost profiles have the most important influence. It is concluded that shipowners need to keep themselves fully informed of changes in cost and improvements in technology that may indicate replacement of a vessel somewhat sooner than normal replacement age.