Mode choice and shopping mall parking

In this thesis, I analyze individuals' mode choice decisions and shopping mall's parking space pricing behavior. Individuals have three choices: first they may come to the mall by car in which case they have to park, second they may come by public transportation, or they do not visit the mall and go for their outside option. The mall determines the price of the good and the parking fee after the government sets public transportation fare. I find that the equilibrium parking fees are always less than the marginal cost of providing parking spaces and more importantly they are two of the many parking fees that lead to the social optimum. The mall can be thought as using parking as a loss leader to increase its profits, and implicitly employing mixed bundling in which the good is sold either alone or bundled with parking

Parking as a loss leader at shopping malls

This paper investigates the pricing of malls in an environment where shoppers choose between a car and public transportation in getting to a suburban mall. The mall implicitly engages in mixed bundling; it sells goods bundled with parking to shoppers who come by car, and only goods to shoppers who come by public transportation. There are external costs of discomfort in public transportation due to crowdedness. Thus, shoppers using public transportation deter each other. The mall internalizes these external costs, much like a policy maker. To do so, it raises the sales price of the good and sets a parking fee less than parking’s marginal cost. Hence, parking is always a loss leader. Surprisingly, this pricing scheme is not necessarily distortionary