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Microeconomics Question from Walter E. Williams:Edit

Many shopping centers provide zero price parking for their clients. Some have argued that such policy leads to inefficient location of resources since to insure sufficient parking for center clientele space must be provided for "freeloaders" who shop at stores near the center. Who gains from the zero price parkings? How? Would it be economically more efficient for centers to allocate parking space by price? (Demsetz 1964)

AnswerEdit

The ‘free-loading’ parkers gain for the parking which is paid for by the customers of the stores at the shopping center. Additionally, it should be considered that the stores near the parking, but not part of the shopping center will pay higher rent for the convenience of their customers who may park at the shopping center and walk to shop in their non-mall stores, generating windfall profits for that landlord. (BIG ASSUMPTION: that the landlords owned the land before the mall was planned). All of the shoppers in the mall will pay a price (bundled with the goods and reflecting the rent of the stores in the mall) which will help cover the cost of the parking, if it is priced indirectly. In essence, a parker can only free load if he does not make a purchase.

Generally speaking, it is not efficient to allocate parking by price (directly) due to the increased costs of monitoring and enforcement. This becomes more profitable where land values are high. The costs of a parking monitor are justified when the costs imposed by freeloaders are higher.

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