The Learning Curve and Pricing in the Chemical Processing Industries

TLDR

The study uses data on 37 chemical products to test hypotheses about learning curves and industrial price behavior. The analysis finds a strong, consistent learning effect driven by cumulative output and investment, with small economies of scale, slope variations tied to R&D and capital intensity, and market concentration shaping price flexibility and timing.

Abstract

Data on 37 chemical products are used to test a number of hypotheses about the learning curve and industrial price behavior. The results document a strong and consistent learning effect. Learning is found to be a function of cumulated industry output and cumulated investment rather than calendar time. Standard economies of scale appear significant but small in magnitude relative to the learning effect. Variations in the slope of the learning curve are linked to differences in R&D expenditures and capital intensity. Market concentration is found to be a strong influence on price flexibility and the timing of learningrelated price changes.