Advertising Versus Sales In Demand Creation

Using an analytical model, we investigate the dynamics of a firm with market power whose advertisements and sales contribute to its customers’ stock of goodwill. An advertising campaign precedes the firm’s sales when customers are not familiar with its product, (e.g., movies), whereas sales of a new brand of a familiar product may start without advertising (e.g. Crocs shoes). For constant demand elasticity, both advertising and sales take place from the start. Two different types of solutions then emerge: one for low demand elasticity and one for high demand elasticity. These solutions are analyzed by phase diagrams. We also perform a numerical sensitivity analysis.Dynemic Advertisement, Diffusion, Adoption, Goodwill, Learning by Buying, Phase Diagram

Efficient Agglomeration of Spatial Clubs (or: The Agglomeration of Agglomerations)

We investigate here the agglomeration of spatial clubs in an efficient allocation of a club economy. The literature on agglomeration has focused largely on a primary agglomeration caused by direct attraction forces. We concentrate mainly on secondary and tertiary agglomerations caused by a primary agglomeration. Initially, scale economies in the provision of club goods (CGs) lead each CG to agglomerate in facilities of its club. This primary agglomeration causes a secondary concentration of population around these facilities, which in turn brings about a tertiary agglomeration of facilities of different clubs into centers in the midst of population concentration. The agglomeration of facilities occurs only if a secondary concentration of population takes place. We analyze in detail two specific patterns of agglomeration. One is the central location pattern in which the facilities of all clubs agglomerate perfectly in the middle of the complex. The second is a triple-centered complex in which the center in the middle of the complex consists of perfectly agglomerated facilities of different clubs, each with a single facility per complex. The remaining two centers also consist of facilities of different clubs, but cubs in these centers each have two facilities per complex, one in each center. Each of these two centers is located between a boundary and the middle of the complex closer to the middle of the complex than to the boundary. The facilities in these two centers form condensed clusters of facilities that may contain residential land in between the facilities. We then show that these agglomeration patterns also characterize agglomerations in general. The literature maintains that an efficiently behaving municipality increases its tax-base. This implies that it is in the municipality’s interest to achieve efficiency. The best way for a local government to achieve this desired efficiency is by partially intervening in market operations in order to internalize local externalities. We argue that it suffices for such an intervention to be limited to providing the city’s infrastructure, to taxing only residential land rents and clubs’ profits, to subsidizing the basic industry of the city, and to partially regulating land uses. Consequently, if the local governments of all complexes behave properly the decentralization of the efficient allocation of the club economy should be attained.effective or ineffective agglomeration, spatial clubs, complex, configuration, collective goods, local public goods, facilities, direct and indirect attraction, primary and tertiary agglomerations, secondary population concentration.

EFFICIENT AGGLOMERATION OF SPATIAL CLUBS

The literature on agglomeration has focused largely on primary agglomeration caused by direct attraction effects. Here we focus on secondary and tertiary agglomerations caused by a primary agglomeration. Initially, scale economies in the provision of club goods (CGs) lead each CG to agglomerate in facilities of a club. This primary agglomeration causes a secondary concentration of population around these facilities, which in turn brings about a tertiary agglomeration of facilities of different clubs into centers. The agglomeration of facilities occurs only if a secondary concentration of population takes place. We analyze in detail two specific patterns of agglomeration. One is the central location pattern in which the facilities of all clubs agglomerate perfectly in the middle of their joint market area. The second is a triple-centered complex in which the center in the middle of the complex consists of perfectly agglomerated facilities of different clubs, each with a single facility per complex. The other two sub-centers consist of facilities of different clubs, each with two facilities per complex. These sub-centers are closer to the middle of the complex than to the boundaries and their facilities form condensed clusters of facilities that may contain residential land in between the facilities.agglomeration, clubs, complex, collective goods, local public goods, indirect attraction