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Spatial Price Discrimination: The Use of Parking Coupons by Downtown Retailers

Spatial Price Discrimination: The Use of Parking Coupons by Downtown Retailers Price discrimination in monopolistically competitive markets affects firms' joint profits through several pecuniary and nonpecuniary externalities. Discrimination is a public good if the net effect is positive. Using a random utility shopping destination choice model we investigate the effect of a downtown parking coupon program that discriminates in favor of suburban consumers and against consumers based downtown. The program appears profitable for downtown stores collectively, but in the noncooperative Nash equilibrium stores do not participate. Participation is thus subject to free-riding. As the subsidy rate required to induce participation rises, profits fall. Whatever the subsidy rate, social surplus declines. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Spatial Price Discrimination: The Use of Parking Coupons by Downtown Retailers

Lindsey, C.; West, Douglas
Review of Industrial Organization , Volume 12 (3) – Sep 29, 2004
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References (24)

Publisher
Springer Journals
Copyright
Copyright © 1997 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
DOI
10.1023/A:1007795629282
Publisher site
See Article on Publisher Site

Abstract

Price discrimination in monopolistically competitive markets affects firms' joint profits through several pecuniary and nonpecuniary externalities. Discrimination is a public good if the net effect is positive. Using a random utility shopping destination choice model we investigate the effect of a downtown parking coupon program that discriminates in favor of suburban consumers and against consumers based downtown. The program appears profitable for downtown stores collectively, but in the noncooperative Nash equilibrium stores do not participate. Participation is thus subject to free-riding. As the subsidy rate required to induce participation rises, profits fall. Whatever the subsidy rate, social surplus declines.

Journal

Review of Industrial Organization – Springer Journals

Published: Sep 29, 2004

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