Experience and learning curve models are developed from the basic premise that individuals and organizations acquire knowledge by doing work. By gaining experience through repetition, organizations and individuals develop relatively permanent changes in behavior or learning. As additional transactions occur in a service, or more products are produced by a manufacturer, the per-unit cost often decreases at a decreasing rate. This phenomenon follows an exponential curve. The organization thus gains competitive advantage by converting this cost reduction into productivity gains. This learning competitive advantage is known as the experience curve, the learning curve, or the progress curve.

It is common for the terms experience curve and learning curve to be used interchangeably. They do, however, have different meanings. According to definitions by Hall and Starr, the experience curve is an analytical tool designed to quantify the rate at which experience of accumulated...