A class of learning by doing model with multiplicative uncertainty:economic implications
ISSN: 2341-2356
Year of publication: 1997
Issue: 23
Pages: 1-22
Type: Working paper
More publications in: Documentos de Trabajo (ICAE)
Abstract
Learning by doing denotes the cost reduction in production that firms achieve with their output. We check if the known properties of deterministic models, concerning the behaviour of the finns, hold under uncertainty. A discrete time and finite horizon model is considered: a monopolist, facing a linear demand, maximizes the expected profit flow, with multiplicative uncertainty on the cost reduction and an upper bound for this reduction. We show analytically that some properties do hold and some others do not.