Learn in the textbookCompetitive Economics and Market Concepts
DefinitionThe experience curve (経験曲線) is the relationship in which the cost per unit falls by a fixed rate as cumulative output grows.
ExplanationCumulative output is the total number of units made since production began. As production continues, workers gain skill, wasted steps disappear and processes improve, so costs come down. It is usually expressed as a fixed percentage drop in cost each time cumulative output doubles.
AnalogyA dish you cook for the first time takes a while, but after making it dozens of times you know the routine and can finish it much faster.
Memory hookPlot unit cost on the vertical axis and cumulative output on the horizontal axis, and you get a curve that slopes downward to the right and gradually flattens.