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The Experience Curve and the Market Size of Competitive Consumer Durable Markets

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  • Joachim Kaldasch

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.

Suggested Citation

  • Joachim Kaldasch, 2011. "The Experience Curve and the Market Size of Competitive Consumer Durable Markets," EconStor Preprints 59749, ZBW - German National Library of Economics.
  • Handle: RePEc:zbw:esprep:59749
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    File URL: https://www.econstor.eu/bitstream/10419/59749/1/experience.pdf
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    References listed on IDEAS

    as
    1. Kaldasch, Joachim, 2011. "Evolutionary model of an anonymous consumer durable market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(14), pages 2692-2715.
    2. Patrik Söderholm & Ger Klaassen, 2007. "Wind Power in Europe: A Simultaneous Innovation–Diffusion Model," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 36(2), pages 163-190, February.
    3. Kaldasch, Joachim, 2015. "The Product Life Cycle of Durable Goods," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 1-17.
    4. 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.
    5. Victor M. Yakovenko & J. Barkley Rosser, 2009. "Colloquium: Statistical mechanics of money, wealth, and income," Papers 0905.1518, arXiv.org, revised Dec 2009.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Kaldasch, Joachim, 2015. "Dynamic Model of Markets of Homogenous Non-Durables," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 1-12.
    2. Kaldasch, Joachim, 2011. "Evolutionary Model of Non-Durable Markets," EconStor Preprints 50531, ZBW - German National Library of Economics.

    More about this item

    Keywords

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

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • A10 - General Economics and Teaching - - General Economics - - - General
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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