Parking Fees and Retail Prices

Abstract

We study the pricing strategy of a retailer that supplies both self-parking and valet parking space. Shoppers differ in their valuations of the good and valet parking, and dislike the prospect of paying for parking if the retailer does not have what they want. As insurance, an unregulated retailer provides self-parking free and embeds the cost in retail prices. It may price valet parking above or below cost. In the social optimum, self-parking is free and valet parking is priced at a loss. Relative to the unregulated equilibrium, more valet parking and total parking are provided.