The reasons why a player would not be incentivised to exchange their old gear for new one are the following:
- the gear is a rare commodity in the game
- the gear is evolving together with the character (it gets improved by smiths)
- the concept that "if the enemy has it, you can have it", that usually applies with the "after the enemy is dead" addendum :) that usually implies that the enemy is going to use the shield and damage it in the process as well.
Regarding of what you have said about keeping track of damaged equipment, I entirely agree. It can become a tedious task in most games, but since this is a text based game, it will not pressure the player to make rapid decisions and I have already put in place a system that signals the need for repairs, when that need arises.
If you are interested in seeing it in action (for swords, not for shields), my game is called Project Tezerat and it can be downloaded for free in a very alpha version, here, on itch.io. I'm not going to post a link to it, because I believe the forum prohibits it.