Price Discrimination -- Hooray!
2024 08 27
Matt Yglesias in The Coming World of Ubiquitous Price Discrimination
has a nice discussion of the paradox that price discrimination by a monopolist is more efficient than setting a single profit maximizing price. [This is the same principle behind Lansberg’s silly “Brain Teaser” about the resource cost of monopoly produced apples and competitively produced pears. https://www.wsj.com/articles/what-aspiring-economists-arent-being-taught-a3f73484]
The results of this becoming more widespread are ambiguous, but there is one area where it would be unambiguously good: street parking. Every city is a monopoly supplier of its streets and roads and sets a uniform fee for the use of each location – zero for the roadway itself, zero for most of the street used for parking, and an almost single per minute charge for metered spaces (not charged on some days and some hours). This leads to inefficient use of street parking spaces.
In principle one ought to be able to find a place to park near-ish to where they are going if they are willing to pay for it. This would require setting meter fees by time of day as well as location so that (at the extreme) no space would be occupied by someone who values it less than someone else. The high-tech version of this would have sensors to dynamically adjust fees according to the ebb and flow of demand for parking in each area and your self-driving car would know where to find and reserve an open spot. 😊 Of course, this would encourage parking garages/lots to offer time of day rates as well.
And to go full Neo-Social Democrat we could extend this to parking in residential neighborhoods. My street would be pretty low cost any time of day, but those closer to commercial areas would have higher daytime rates. And to bring this back to housing -- everything is about housing, right? -- if existing residential parkers had a share of the revenues they ought to approve AND be happy if that new apartment building down the street DID create more parking scarcity and more revenue for them. NIMBYs would become YIMBYs overnight! And the new apartments would have different incentives about including time of day parking for residents. The margins of adjustment are endless!
It should go without saying -- this means it has to be said -- that the increased parking revenue would not just go up in smoke. The city could use the increased revenue to reduce property or sales or income taxes or subsidize Metro or whatever.
[Standard bleg: Although my style is know-it-all-ism, I do sometime entertain the thought that, here and there, I might be mistaken on some minor detail. I would welcome comments on these views.]
Image Prompt: The mayor of the city standing by a parking meter with their hand extended to receive payment.
The Uberification of pricing. Now coming to every government near you. I cannot wait. It's the socialist dream.
Towns have gotten rid of the parking meters, where drivers could get the benefit of the unused time, to requiring one to pay at a kiosk and put the receipt not the windshield, which ensures that no one gets to enjoy the benefit of a parking spot paid for by someone else (nothing is free). Instead, the towns make sure they get every single penny for their own pockets. Outside of cities, parking should be free. The public already paid for the streets and their cleaning and maintenance. The parking meters (the old school coin kind) already paid for themselves over and over I imagine.
The idea that the government will use the increased taxes from parking to reduce any taxes is naive and foolish. I'd love to see cases where a federal, state or local government used increased revenue to lower taxes meaningfully.
I have lived in townhouse complexes with free visitor parking and complexes with paid parking (by buying tickets paid for at a kiosk). At the free parking location, the parking lot is invariably full most of the time. With paid parking and occasional enforcement patrols, there's usually empty spaces, as thrifty people prefer to park on the street (a few blocks away) to save money. I prefer paid parking, because in the "free parking" scenario, the free resource is often entirely used up.