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Learning Curve Spillovers and Market Performance

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  • Pankaj Ghemawat
  • A. Michael Spence

Abstract

This paper examines the effect of learning curve spillovers on market structure and performance. We derive a simple characterization of the "true" marginal cost for a broad class of learning curves, and use calculated examples to show that spillovers substantially undercut the barriers to entry erected by proprietary learning. Unlike the case of cost-reducing research and development, spillovers also tend to improve market performance; the increased efficiency of the industrywide reduction process typically outweighs the decrease in firms' incentives to reduce costs by expanding output.

Suggested Citation

  • Pankaj Ghemawat & A. Michael Spence, 1985. "Learning Curve Spillovers and Market Performance," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(Supplemen), pages 839-852.
    • Handle: RePEc:oup:qjecon:v:100:y:1985:i:supplement:p:839-852.
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    File URL: http://hdl.handle.net/10.1093/qje/100.Supplement.839
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