Parking Discounts: Price Discrimination with Different Marginal Costs

Parking Discounts: Price Discrimination with Different Marginal Costs 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Parking Discounts: Price Discrimination with Different Marginal Costs

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Publisher
Springer US
Copyright
Copyright © 2016 by Springer Science+Business Media New York
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-016-9530-3
Publisher site
See Article on Publisher Site

Abstract

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.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Jun 29, 2016

References

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