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The experience curve and the market size of competitive consumer durable markets

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  • Kaldasch, Joachim

Abstract

An evolutionary model of the product life cycle is applied to derive the experience curve and the market size of (expensive) durable goods. The experience (learning) curve suggests that the real costs per unit decrease with an increasing cumulative output (Henderson's law). Based on the idea that in a competitive market firms are forced to pass cost advantages on to the price, the evolutionary model suggests that the mean price and also the mean costs are governed by an exponential decline with time. Simultaneously the mean price evolution satisfies Henderson's law. The market size is defined here by the number of active firms. The market size is shown to follow the total market revenue if the latter exhibits fast variations, else the size is nearly constant. A comparison with an empirical investigation confirms the model predictions.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 33370.

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Date of creation: 14 Sep 2011
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Handle: RePEc:pra:mprapa:33370

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Keywords: experience curve; learning curve; market evolution; evolutionary economics; economic growth; product diffusion; Gompertz diffusion; product life cycle; durable goods;

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  1. Kaldasch, Joachim, 2011. "The product life cycle of durable goods," MPRA Paper 33174, University Library of Munich, Germany.
  2. Joachim Kaldasch, 2013. "Evolutionary Model of a Anonymous Consumer Durable Market," Papers 1306.3395, arXiv.org.
  3. Zhu Wang, 2008. "Income Distribution, Market Size and the Evolution of Industry," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(3), pages 542-565, July.
  4. Victor M. Yakovenko & J. Barkley Rosser, 2009. "Colloquium: Statistical mechanics of money, wealth, and income," Papers 0905.1518, arXiv.org, revised Dec 2009.
  5. Patrik Söderholm & Ger Klaassen, 2007. "Wind Power in Europe: A Simultaneous Innovation–Diffusion Model," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 36(2), pages 163-190, February.
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Cited by:
  1. Kaldasch, Joachim, 2011. "Evolutionary Model of Non-Durable Markets," MPRA Paper 33743, University Library of Munich, Germany.

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