The experience curve effect refers to the systematic decline in the cost per unit that is achieved as the cumulative volume (and therefore experience) increases.
There are three sources of the experience curve effect:
- learning (the increasing efficiency of labor that arises chiefly from practice)
- technological improvements (including process innovations, resource mix changes, and product standardization)
- economies of scale (increased efficiency due to size)
- ^ American Marketing Association, AMA Dictionary.