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This study does not report actual sales selective information (which are merely unavailable, in a comparable or consistent manner in nearly all of the cities of the world). This study gives, however, my estimates for the global latent demand, or the P.I.E. for pubs, clubs, and nightclubs. It likewise shows how the P.I.E. is disunited all over the world’s cities. In order to make these estimates, a multi-stage methodology was used that is often times taught in courses on international strategic planning at graduate schools of business.

What is Latent Demand and the P.I.E.?
The conception of latent demand is rather subtle. The term latent quintessentially refers to something that is dormant, not observable, or not yet realized. Demand is the notion of an economic amount that a target population or market requires beneath dissimilar assumptions of price, quality, and distribution, amongst other factors. Latent demand, therefore, is normally specified by economists as the industry net profit of a market when that market becomes accessible and beautiful to serve by competing firms. It is a measure, therefore, of potential industry net profit (P.I.E.) or total revenues (not profit) if a market is served in an effective manner. It is distinctively conveyed as the total revenues potentially extracted by firms. The “market” is specified at a given level in the value chain. There may be latent demand at the retail level, at the wholesale level, the devising level, and the raw materials level (the P.I.E. of higher levels of the value chain being always littler than the P.I.E. of levels at lower levels of the same value chain, assuming all levels maintain minimum profitability).

The latent demand for pubs, clubs, and nightclubs is not actual or historic sales. Nor is latent demand future sales. In fact, latent demand may be lower either lower or higher than actual sales if a market is inefficient (i.e., not representative of comparatively competitory levels). Inefficiencies arise from a number of factors, including the lack of international openness, cultural barriers to consumption, regulations, and cartel-like conduct on the share of firms. In general, however, latent demand is distinctively more spectacular than actual sales in a city market.

Another reason why sales do not equate to latent demand is interchange rates. In this report, all figures assume the long-run efficacy of currency markets. Figures, therefore, equate values based on purchasing power parities throughout countries. Short-run distortions in the value of the dollar, therefore, do not figure into the estimates. Purchasing power parity estimates of country income were assembled from official sources, and extrapolated using standard econometric models. The report uses the dollar as the currency of comparison, but not as a measure of dealing volume. The units employed in this report are: US $ mln.

For reasons discussed later, this report does not consider the notion of “unit quantities”, only total latent revenues (i.e., a calculation of price times amount is never made, altho one is implied). The units employed in this report are U.S. dollars not adjusted for inflation (i.e., the figures integrate inflationary trends) and not adjusted for future dynamics in interchange rates (i.e., the figures reflect intermediate interchange rates over recent history). If inflation rates or interchange rates vary in a substantial way equated to recent experience, genuinely sales may likewise exceed latent demand (when conveyed in U.S. dollars, not adjusted for inflation). On the other hand, latent demand may be specifically higher than actual sales as there are often times distribution inefficiencies that reduce actual sales underneath the level of latent demand.

As noted earlier, this study is strategic in nature, taking an aggregate and long-run view, disregarding of the players or productions involved. If fact, all the current productions or services on the market may discontinue to subsist in their present form (i.e., at a brand-, R&D specification, or corporate-image level) and all the players may be substituted by other firms (i.e., by way of exits, entries, mergers, bankruptcies, etc.), and there will still be an global latent demand for pubs, clubs, and nightclubs at the aggregate level. Product and service providing details, and the actual identity of the players involved, while important for sure issues, are comparatively unimportant for estimates of latent demand.

The Methodology
In order to estimate the latent demand for pubs, clubs, and nightclubs on a city-by-city basis, I used a multi-stage approach. Before applying the approach, one needs a basic theory from which such estimates are created. In this case, I to a considerable degree rely on the use of sure basic economic assumptions. In particular, there is an assumption governing the shape and type of aggregate latent demand functions. Latent demand functions relate the income of a country, city, state, household, or person to realized consumption. Latent demand (often realized as consumption when an industry is efficient), at any level of the value chain, takes place if an equilibrium in realized. For firms to serve a market, they ought to grasp a latent demand and be capable to serve that demand at a minimal return. The single most essential variable determining consumption, assuming latent demand exists, is income (or other financial resources at higher levels of the value chain). Other elements that may pivot or shape demand curves include external or exogenous shocks (i.e., business cycles), and or changes in utility for the product in question.

Ignoring, for the moment, exogenous shocks and variations in utility throughout countries, the aggregate relation among income and consumption has been a central theme in economics. The figure beneath concisely sums up one aspect of problem. In the 1930s, John Meynard Keynes conjectured that as incomes rise, the intermediate propensity to consume would fall. The intermediate propensity to consume is the level of consumption divided by the level of income, or the slope of the line from the origin to the consumption function. He approximated this kinship empirically and found it to be unfeigned in the short-run (mostly based on cross-sectional data). The higher the income, the lower the intermediate propensity to consume. This type of consumption function is labeled “A” in the figure underneath (note the rather flat slope of the curve). In the 1940s, another macroeconomist, Simon Kuznets, approximated long-run consumption functions which conveyed that the marginal propensity to consume was rather neverending (using time series data throughout countries). This type of consumption function is show as “B” in the figure beneath (note the higher slope and zero-zero intercept). The intermediate propensity to consume is constant.

Is it declining or is it constant? A number of other economists, notably Franco Modigliani and Milton Friedman, in the 1950s (and Irving Fisher earlier), explained why the two functions were dissimilar using respective assumptions on intertemporal budget constraints, savings, and wealth. The shorter the time horizon, the more consumption may depend on wealth (earned in former years) and business cycles. In the long-run, however, the propensity to consume is more constant. Similarly, in the long run, households, industries or countries with no income in the long run have no consumption (wealth is depleted). While the debate surrounding beliefs with regards to how income and consumption are affiliated and interesting, in this study a very peculiar school of thought is adopted. In particular, we are taking into account the latent demand for pubs, clubs, and nightclubs throughout a heap of 230 countries. The smallest have less than 10,000 inhabitants. I assume that all of…