Search Theory and the Manufacturing Progress Function

• Published in: Management science Vol. 32; no. 8; pp. 948 - 962
• Main Author: Muth, John F
• Format: Journal Article
• Language: English
• Published: Linthicum, MD INFORMS 01.08.1986; Institute of Management Sciences; Institute for Operations Research and the Management Sciences
• Series: Management Science
• Subjects: Applied sciences; Capital costs; Concavity; Cost functions; Costs; Exact sciences and technology; Innovations; Inventory control, production control. Distribution; learning; Learning curves; Management science; Manufacturing; Mathematical analysis; Mathematical minima; Modeling; Operational research and scientific management; Operational research. Management science; Power functions; production; Production costs; Production scheduling; production/scheduling: work studies; Productivity; Productivity improvement; scheduling: work studies; search and surveillance; Technological innovation; technology; Technology adoption; Theory; Working hours; Technical progress; Integrated planning; Production control; Production
• ISSN: 0025-1909; 1526-5501
• DOI: 10.1287/mnsc.32.8.948

A theory based upon random search within a fixed population of technological possibilities is used to explain the manufacturing progress function. The theory is consistent with the power function relation between unit costs and cumulative output that has frequently been observed. It is also consistent with initial rates of improvement smaller than those predicted later by the power function relation, the eventual cessation of cost reduction, and an irregularity of improvements. Existing theories in the literature either fail to agree with the main empirical phenomena or else assume precisely what they attempt to explain.