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

Comments

[Kevin]

Where in this story do the professors who have red permits yet park in yellow spots fit?

[Philip]

Interesting point! I asked Dr. Boks and he said professors always park in the red spots because of their vanity and the near-infinite stigma associated with resembling a student in any way. Perks such as good parking spots and corner office are what faculty members care about most, says Boks. Thus, the rational faculty member plays according to type.

I pointed out that this was not true, empirically. Faculty members do sometimes park in green spots.

(Boks responded that he does not believe in data of any kind.)

[Chris R]

Ah, an economic theorist. If the argument doesn't involve the separating hyperplane theorem, it's not an argument at all. Too trivial.

You can sidestep the whole issue by getting a Nobel and thus a reserved parking space. Me, I'd just be up for ganking one of those golf carts. Running over pedestrians on my bike is starting to get old.

[Leda Swan]

My university is on the slope of a mountain, so it's full of stairs. Whilst professors can park inside the campus and almost on top of the mountain and work their way down, students park on the base of the mountain and make their way up! Your post just reminded me of that.