Learning and the Cost of Production

Previous work has developed theoretical production models for airframes. The model was developed for a firm producing to an order which specifices a quantity and delivery date for output. The model augments a neoclassical production function with a learning hypothesis, and the discounted cost of production is minimized to yield optimal time paths for both production and costs. The model has been applied to the C141 airframe program with good results. In that application the process of transferring the theoretical model into a statistical model of the C141 data required assumptions about the details of the production process that the theoretical model did not address. The purpose of this paper is to apply the model to a data environment that is more compatible with the production issues addressed by the model. Here, the model is stated in more general form, data collected on the F102 airframe program is presented, the parameters of the model are estimated, and the economic implications are discussed. (Author) Presented at the Annual Conference of the Southern Economic Association (51st), 4-6 Nov 81, New Orleans, LA. Prepared in cooperation with Louisiana State Univ., Dept. of Quantitative Business Analysis. Contract F33615-81-K-5116.