THE RESEARCH DESIGN FOR THIS STUDY WAS DIVIDED INTO FOUR STAGES WITH EACH STAGE DESIGNED TO PROVIDE INFORMATION ON THE FOLLOWING FOUR ISSUES: (1) IN 1970 AND IN 1976 DID DETERIORATION OCCUR IN THE SAME AREAS OF THE CITY IN WHICH ADULT ENTERTAINMENT BUSINESSES WERE LOCATED; (2) DOES THIS RELATIONSHIP HOLD WHEN OTHER FACTORS ARE CONTROLLED STATISTICALLY; (3) IF THE RELATIONSHIPS PERSIST, DO ADULT ENTERTAINMENT ESTABLISHMENTS CONTRIBUTE TO THE DETERIORATION; AND (4) IS THE EFFECT OF ADULT ENTERTAINMENT ON NEIGHBORHOOD QUALITY A THRESHOLD PHENOMENON. STATISTICAL METHODS USED IN THE STUDY WERE ANALYSIS OF VARIANCE AND MULTIPLE REGRESSION. AN 0.05 LEVEL OF SIGNIFICANCE WAS CHOSEN. IT WAS FOUND THAT ALCOHOL-SERVING ESTABLISHMENTS ARE SIGNIFICANTLY ASSOCIATED WITH NEIGHBORHOOD DETERIORATION. SEXUALLY ORIENTED FACILITIES ARE NOT. THESE RELATIONSHIPS PERSIST EVEN WHEN LEGAL AND MARKET INFLUENCES ARE CONTROLLED. IT WAS FURTHER FOUND THAT THE ALCOHOL-SERVING BUSINESSES FOLLOW RELATIVE DETERIORATION. ADDITIONAL DETERIORATION, HOWEVER, FOLLOWS THE ESTABLISHMENT OF THE BUSINESSES. FINALLY, IT WAS FOUND THAT THE EFFECT OF EACH ADDITIONAL ADULT ENTERTAINMENT ESTABLISHMENT DEPENDS UPON THE NUMBER OF SUCH ESTABLISHMENTS ALREADY IN THE AREA. THE INCREASE IN DETERIORATION ASSOCIATED WITH EACH ADDITIONAL ESTABLISHMENT IS NOT CONSTANT, AND THUS A THRESHOLD EFFECT IS PRESENT. IT IS RECOMMENDED THAT PUBLIC POLICY DECISIONS REGARDING THE LOCATIONS OF ADDITIONAL ESTABLISHMENTS BE BASED ON FINDINGS OF THIS STUDY. TABLES AND FIGURES ARE INCLUDED. (MLC)