Learning by doing,inventory and optimal pricing policy |
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| Affiliation: | 1. Department of Managerial Economics and Decision Sciences at Northwestern University in Evanston, Illinois, USA;2. Bar Ilan University in Ramat-Gan, Israel;3. University of Pennsylvania in Philadelphia, USA;1. Department of Business Administration, Momoyama Gakuin University, 1-1 Manabino, Izumi, Osaka 594-1198, Japan;2. Graduate School of Business Administration, Kobe University, 2-1 Rokkodai, Nada, Kobe, Hyogo 657-8501, Japan;1. School of automation, Beijing University of Posts and Telecommunications, Beijing 100876, China;2. School of Economics and Management, Tsinghua University, Beijing 100084, China;1. Faculty of Earth Sciences, University of Shahrood, Shahrood, Iran;2. Department of Mining Engineering, Isfahan University of Technology, Isfahan 8415683111, Iran;1. Department of Neurology and Research Institute of Clinical Medicine of Jeonbuk National University, 20 Geonji-ro, Deokjin-gu, Jeonju 54907, South Korea;2. Biomedical Research Institute, Jeonbuk National University Medical School and Hospital, 20 Geonji-ro, Deokjin-gu, Jeonju 54907, South Korea |
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| Abstract: | The notion of the “learning effect” suggests that when a firm introduces a new product, the costs of production will decline as the accumulated output increases. In this paper we analyze this effect on price paths and production rates along time. The distinction between production level and sales level affects the behavior of the firm that can utilize the option of holding inventory. In this case we show that the optimal price increases, even though production costs decrease over time due to “learning by doing.” |
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