NBER Working Paper No. 3143
When economic activity is concentrated over space or over time, it is more efficient. Most production occurs in geographic hot spots, and most production occurs between 9 and 12 in the morning and 1 to 5 in the afternoon on weekdays. The thick-market efficiencies that encourage the concentration of activity in certain time periods may be internal to the firm, or they may be external to the firm. When they are internal, the firm can make efficient arrangements to take advantage of the effects. The firm should martial all its forces from time to time in bursts of activity. When thick-market effects are external to the firm, the possibility of indeterminacy can arise. Aggregate fluctuations may arise with either internal or external thick-market effects.
Document Object Identifier (DOI): 10.3386/w3143