Sort of like lunch, there is no such thing as a free parking space. It costs us dollars or time.
Hoping to optimize so valuable a commodity, some cities are installing parking devices that use demand and supply to price spots. The approach resembles a variable pricing model where a good becomes more expensive when less is available. Others, concerned about the time we waste have apps that instantaneously identify empty parking spaces.
Now, we can add Parking Panda.
Like any market maker, Parking Panda pairs people with parking spots and those who need them. Anyone who has a parking spot can enroll. You might own an office building with a lot that is unused over the weekend or have a home with a driveway you would like to monetize. Whatever the reason, by enrolling with Parking Panda, someone looking for parking can find you.
Our bottom Line: Isn’t it fascinating how a market, with no direction from government, can satisfy people’s needs and make a community more efficient?
Sources and Resources: Thanks to Slate where I first learned about Parking Panda. Also, here is the classic Donald Shoup paper, ”The High Cost of Free Parking,” an econlife post on San Francisco parking solutions, and a recent NY Timesarticle on their progress.
Should you pay more to see a blockbuster film during the Christmas holidays when movie going peaks? Less for an obscure foreign film? More on Saturday and at 7 pm? Less on Tuesday and 11 am?
The issue is variable pricing. In this paper, several researchers suggest that “one price fits all” no longer makes sense for movie tickets. Their ideas are discussed here in an Atlantic article with several fascinating graphs about our movie going habits.
And, here (Israeli congestion pricing), here (baseball games and airlines), here (a Chicago restaurant) and here (Broadway tickets), econlife.com looks at variable pricing elsewhere.
Our bottom line: Now that we have the technological capability to variably price, should we?
The Economic Lesson Variable or dynamic pricing is all about price elasticity of demand. If price changes a lot and the quantity we buy remains almost the same, as with medication, then our demand is inelastic. By contrast, if price swings have a big impact on buying, then our response is elastic.
With movie tickets, certain consumers have an elastic response to lower prices; when price descends they see many more films. Meanwhile, others whose demand is inelastic respond minimally to price changes. Awareness of price elasticity of demand could generate more revenue for movie theaters and savings for consumers.
An Economic Question: Depending on the movie, the time, the day and the season, how would higher and lower prices affect people with elastic demand? Inelastic demand?
For a new restaurant in Chicago, Next, no one is sitting at the phone taking reservations. Instead, online, you can buy a ticket for a table seating 2 or 4 (not 3 or 5). According toChicago Magazine, the tickets are nonrefundable, include the tip and tax, and extras such as wine.
No “underutilized” seats (capital) because a table for 4 has 4 paid for instead of the 3 people who might be dining.
No telephone reservationists (a labor saving approach).
Variable pricing, based on demand and costs. The owners plan to use peak pricing by charging more for the 7 pm Saturday reservation that everyone wants and less for 9:30 on Tuesday evening. Then, like airlines, prices can change as demand changes.
And finally, through the new software designed for this approach, they are changing the market structure for online booking; OpenTable, where most people book online, will have new competition.
With a waiting list of thousands, Next restaurant tickets are being resold on Craigslist and eBay.
The Economic Lesson
Proving again that economics need not be the dismal science, a restaurant can provide examples of capacity utilization, demand and supply, variable pricing, technological innovation, and competition.
Chef Achatz referred to diminishing returns in a recent interview when he said that he believed in small portions (and a 23 course meal).