Exhibit 5.15 shows how costs fall with experience for various learning rates and levels of experience. Alberts (1989) contends that most cost declines are caused partly by innovations and partly by economies of scale. Innovation-based causes of cost reductions include
1. Operator innovations—in which Workers figure out how to procure, manufacture, and distribute goods more efficiently with current technology
2. Management innovations—in which supervisors and managers figure out how to improve operations with existing technologies
3. Process innovations—in which new technologies for procurement, assembly order processing, and distribution lead to increased efficiency