Learning and the Behavior of Potential Entrants

Abstract

The possibility of cost reduction through learning by gathering experience is important in many industries where organizational efficiency in production and management is an important determinant of costs. In these industries, the difference in unit costs of production between experienced firms and potential entrants retards entry. This article investigates the behavior of a potential entrant in such an industry and the nature of dynamic equilibria resulting from the interaction of the entrant and the current producer.