On the relations between demand creation and growth in a monopolistic firm

This paper deals with the allocation of resources over time by a monopolistic firm between growth of the productive capacity and growth of the market-demand capacity. As the demand-creation relations follow an S-shaped curve, different phases in the behavior of the growing firm are conceived in which investment cycles occur both in productive and demand-creation activities. The paper analyzes the case of homogeneous resources as well as nonhomogeneous resources. It is shown that in general the phases in the behavior of the growing firm are preserved in both cases. In the homogeneous case, when there are investment activities in both types of capital, it is shown that the firm will allocate its resources between the two activities in such a way that the ratio of the rate of growth of demand price (with respect to demand-creation capital) and the rate of growth of output (with respect to productive capital) will be equal to one plus the reciprocal of the elasticity of demand and will, therefore, be bounded between zero and one.