Role of Voluntary Associations in the Improvement of Urban Central Shopping Areas

Abstract

Many cities around the world su er from the decline of central shopping areas. Voluntary associations are considered to be one of solutions to this problem. In Japan, shopping district associations have been organized in many shopping areas. Business improvement districts (BIDs) are similar organizations in North America and Europe. This paper discusses the role of voluntary associations in the revitalization of central shopping areas. We take the existence of shutdown shops into account: if there are many shutdown shops in the central shopping area, fewer consumers will frequent the open shops, because shutdown shops seem to downgrade the area's ambience. The establishment of voluntary associations increases the profit of shops in the central shopping area and the consumer surplus. The equilibrium when there is an association is, however, still ine cient, because it does not take into account the increase in consumer surplus. We also examine second-best policies to improve social welfare: optimal membership fees, matching subsidy to the association, and transport-cost subsidy to consumers. We evaluate these policies through numerical analysis.