Ask Edgeworth

Price Discrimination in the Parking Lot

How Academia Differs From the Private Sector (Part 9,653 in an Infinite Series.)

Faculty parking spots, closer to the department buildings and more desirable, are always easy to find. On our campus, these spots are red. It is a rare day when you have difficulty finding a red parking spot. Typically, a red sea of empty faculty spots greets you as you drive onto campus. Yellow and green spaces (the slummy spots for students) fill up by 10:00 a.m. You see cars circulating endlessly through the lots in search of parking.

The students, of course, are a university’s paying customers and faculty members are its employees. I worked at a retail store years ago and we were told to park at the end of the block, lest we inconvenience a customer by forcing him to park far away. The customer always came first, as it were. Not so, in academia.

Picture an enterprise outside of academia, say Walmart, and imagine the customers being unable to find parking spots because a wildly disproportionate number of spots--the best spots, in fact--had been allotted to Walmart employees. Imagine, further, that huge numbers of these coveted spots were usually empty. Customers, if they could find parking spots at all, would park hundreds of yards from the Walmart entrance, and then they would pass dozens of empty parking spots--reserved for boxboys and checkers--as they trudged along to the entrance. Imagine, now, that they had paid for their parking in advance, only to find no available spots. Imagine also that if they happened to park in an empty and perpetually vacant red spot, they would be ticketed and charged an enormous fine equal to many times the daily cost of parking.

This, of course, is what a university does. Employees receive preferential treatment over the paying customers, whilst the latter quite often are denied access to parking they have already purchased. I commented about this peculiar state of affairs to the esteemed economic theorist, Dr. Edgeworth Boks. The good doctor told me that he, himself, had been a part of the team of economists that had designed the scheme in consultation with the university parking authority.

(It shocked me that Dr. Boks had done this, for he seemed to lack the entrpreneurial ability to open a lemonaide stand, let alone to be a consultant of any kind.)

It's a classic example of price discrimination, said Edgie. The university wants to charge different prices to different students, based on their willingness to pay. They cannot identify students whose willingness to pay for parking is high. These students do not wear signs on their foreheads. But their actions reveal their types. Those who are willing to pay through the nose for parking and who dislike the frustration of not being able to find a spot end up parking in the red faculty spots. They receive parking tickets frequently. Thus they pay the university a great deal more for parking than do the students who struggle to find yellow and green parking spots or simply give up on busy days and go home. So we have two implicit prices: the price that students pay for unreliable parking and the higher price that more desperate students fork over in tickets. The ingenius part, says Edgie, is the use of faculty parking spots to make the whole scheme work. Were it not for the numerous vacant faculty spots, the high willingness-to-pay students would not reveal their types and the university would not be able to collect its enormous windfall in parking tickets.

A beautiful thing, says Edgie. Economic theory in action.

(And now Dr. Boks anxiously awaits a call from Walmart.)

(I hope he doesn't hold his breath.)

-P.S.Babcock

Choosing Not to Choose: The Case for Not Voting

After every election there are those who mourn low voter turn-out. Further, they claim that any one who didn't vote was iresponsible and lacked patriotism. I disagree. Sometimes, it is your civic duty not to vote.

Economics tells us voting is irrational. It is virtually impossible that your vote will be decisive, so the expected gain is zero, while the costs in terms of time and effort are non-trivial. Fortunately, most people aren't economist, and--not realizing they're not supposed to vote--vote anyway. Good for them!

But alas, a subset of them shouldn't vote. If you are completely uninformed you should do the society a favor and stay as far away from the polling place as possible. This is one reason I never liked the idea that MTV helped get young people interested in voting. (If the only reason you know anything about the candidates is because you watch MTV, then maybe you should just stay home with your bong.) A fixed cost to voting is a good thing, I say. If voting entails a small fixed cost, then only people who give a damn will make the effort. Heaven help us if it ever becomes possible to vote while watching television. That's the day I move to Antarctica.

But what happens if you don't want to vote for any of the candidates, not because you feel apathetic but because the candidates do not engage you even though the issues do? In a two-party race, to vote for one candidate or the other is to reward that candidate's party. If you don't like the nomnee, you may not want to further the deterioration of your party by voting for him. Nader voters felt this way last time around. Didn't seem like a wise move. The problem was, most Nader folks, in their hearts, preferred Gore to Bush. So the cost of helping Bush should have outweighed the benefit of reforming their own party. I think they simply miscalculated. (Disclosure: I'm trying to inhabit the mind of a Nader voter in that last part, which is very hard to do.)

But if you do not prefer one candidate to the other, then witholding your vote (and urging others to do likewise) in order to reform one party or the other (or both) has an upside and no downside, and could well be your optimal strategy. Not voting could be the act of a civic-minded person. A form of participation in the democratic process.

[It could also be optimal for moderate or libertarian Republicans to vote for Kerry (to make Bush lose and thus push the Republcan party toward fiscal responsibiity and away from the religious right) and for Nader fans to vote for Bush (to make Kerry lose and force the next candidate to cater more to the green wing.) But let's not go there.]

As for myself, I'm leaning toward not voting (for the first time in many years.) I will not expound on my political views, as this is primarily an economics blog not a raving political blog. Moreover, this particular post is really about decision theory. My main point: The choice not to choose is every bit as participatory as is the choice to choose.

Am I alone? Or is a constituency out there that agrees with me?

(And if there is, what do we do for a bumper sticker?)

P.S.Babcock