The Learning Curve in a Competitive Industry

Emmanuel Petrakis, Eric Rasmusen () and Santanu Roy

Industrial Organization from University Library of Munich, Germany

Abstract: We consider the learning curve in an industry with free entry and exit, and price-taking firms. A unique equilibrium exists if the fixed cost is positive. While equilibrium profits are zero, mature firms earn rents on their learning, and, if costs are convex, no firm can profitably enter after the date the industry begins. Under some cost and demand conditions, however, firms may have to exit the market despite their experience gained earlier. Furthermore identical firms facing the same prices may produce different quantities. The market outcome is always socially efficient, even if it dictates that firms exit after learning. Finally, actual and optimal industry concentration does not always increase in the intensity of learning.

JEL-codes: L (search for similar items in EconPapers)
Date: 1995-06-14
Note: A 70KB LaTeX file. A postscript file is available on request from Erasmuse@Indiana.edu.
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Related works:
Journal Article: The Learning Curve in a Competitive Industry (1997)
Working Paper: The learning curve in a competitive industry (1994)
Working Paper: The Learning Curve in a Competitive Industry (1994)
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