Optimal repair of degrading computers under asymmetric information and incentive incompatibility

This paper presents the optimal repair policy of a firmʹs fault-tolerant computer system where asymmetric information and incentive incompatibility problems in allocating the computing resources are prevalent. Traditional maintenance optimization theory focuses on optimization models for repair, replacement, and inspection of machines (computers) subject to breakdowns or deterioration, without considering the allocation of such resources. Likewise, performance evaluation literature of fault-tolerant computers concentrates on deriving reliability and availability measures. This paper is a first attempt to jointly examine both the resource allocation and repair problems of a firmʹs fault-tolerant computer system. This paper presents the optimal repair policy of a firmʹs computer system in the presence of asymmetric information and incentive incompatibility. It applies the resource allocation model developed by Cheng et al. [Cheng, H. K., Freimer, M., Richmond, W., Sumita, U., Optimal allocation and backup of computer resources under asymmetric information and incentive incompatibility. European Journal of Operational Research, 1992, 91, 411–426] to analyze the impact of asymmetric information and incentive incompatibility on the repair policy of a firmʹs fault-tolerant computer system whose capacity degrades over time. A general methodology is presented for deriving the optimal repair policy for the firmʹs computer system by integrating the results from the resource allocation problem and the stochastic model describing the degrading capacity behavior of the computer system. The optimal repair policy is demonstrated via numerical results that offer useful insights. In particular, the conventional wisdom of having a largest asymptotic expected computer capacity does not guarantee a desirable long-run minimum cost to the organization.