This paper studies the problem of a monopolist that produces a certain good and faces two types of customers: drivers and pedestrians. Drivers need parking, while pedestrians do not. Therefore, drivers represent a higher marginal cost for the firm. Among other things, this paper explains the conditions that make parking discounts worthwhile in terms of profits and welfare. Free parking can be socially optimal if two conditions are satisfied: The demand for the good by pedestrians is more concave than is the demand by drivers; and the cost of parking is relatively low.
Review of Industrial Organization – Springer Journals
Published: Jun 29, 2016
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