Mesa Production 1958 Step 16 Price per Unit Decline Curve

# Trace the Price-Per-Unit Decline Curve This Volume Ramp Actually Produced

## 1. Why a Learning Curve Needs a Second Number to Mean Anything

Step 12 wrote down the learning-curve relation governing this line's cost per unit as cumulative volume grows, $C_n = C_1 \cdot n^{-b}$, but a cost curve by itself only describes what this line pays internally to make each transistor — it says nothing about what a buyer actually paid, and the gap between those two numbers is exactly what let demand this series documented in Step 15 turn into the volumes this series has been tracking since Step 1. Through 1958, Fairchild's list price for the 2N696 and 2N697 fell from a figure comparable to what a discrete alloy-junction transistor had cost a few years earlier, documented in this project's 1952 series, down to a fraction of that figure by the time the IBM contract in Step 12 was signed — a decline driven by the same cumulative-volume mechanism as the internal cost curve, but passed through to price with a margin this line's own economics determined, not dictated by the physics of diffusion or masking at all:

$$P_n = C_n \cdot (1 + m_n), \qquad m_n \to m_{\infty} \text{ as competitive pressure forces margin toward a floor}$$

where $P_n$ is the price charged for the $n$-th cumulative unit, $C_n$ the internal cost from Step 12's relation, and $m_n$ a margin fraction that itself falls as more manufacturers reach comparable cumulative volume and compete on price rather than on being the only qualified source. The price a buyer saw in late 1958 was lower than the price a buyer saw in early 1958 for two compounding reasons at once — falling internal cost, and falling margin — and conflating the two, as a reader of Step 12 alone might, would understate how fast this device actually got cheaper.

Price Falls Faster Than Cost Alone Would Predict internal cost versus list price, against cumulative volume, on a log-log axis PRICE AND COST VERSUS CUMULATIVE VOLUME cumulative units produced, n → $ per unit Cn, step 12’s internal cost curve Pn, list price to the buyer early 1958, margin still wide late 1958, margin compressed toward cost Pn = Cn·(1+mn) — price falls on two curves collapsing toward each other, not one the gap between the two lines is margin; it narrows as more sources reach comparable volume

## 2. Real Diagram: What Falling Price Did to Demand Itself

A falling price did not simply reward buyers who had already decided to use transistors; it pulled in buyers who had not previously found a transistor affordable for a given application at all, widening $Q_{\text{commercial}}(t)$ from Step 15 beyond what any fixed set of customers could have produced on their own. This is the ordinary feedback loop of a learning-curve industry: falling cost funds falling price, falling price expands the addressable market, and the expanded market feeds back into the cumulative volume that made the cost fall in the first place.

The Loop Falling Price Closes cumulative volume, cost, price, and addressable demand, feeding back into each other cumulative volume, n cost, then price, falls addressable demand widens a closed loop, not a one-way effect of volume on cost alone

## 3. Why Step 12's Cost Curve Was Only Half the Economic Story

Step 12 was right to describe this line's cost curve as the thing an IBM-sized commitment had to bet on — $C_n$ falling fast enough, soon enough, to stay ahead of the price this line had already promised to charge. What that step left unstated is that the price side of the ledger was moving even faster than the cost side, compressing margin as more of the industry caught up to comparable cumulative volume, and that the resulting price decline is what actually explains the widening demand Step 15 documented from military, aerospace, and now commercial buyers across 1958. The learning curve was never only an internal efficiency story; it was the mechanism that made this device affordable to markets that could not have afforded it a year earlier.

Step 16 does not revise the learning-curve relation Step 12 introduced; it finishes the sentence Step 12 started, by following that same curve out past this line's own cost sheet and into the price the rest of the world actually paid.

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