Per hour parking

A loyal MR reader asks:

How come parking in New York City (well, Manhattan, at least) is always
priced so that the first hour is very expensive ($10-ish), but staying
for the whole day is only slightly more expensive (typically about
double the one hour rate).  Everywhere else in the country it’s pretty
much a flat rate of $X/hour give or take a bit.  You’d think the high
land value of Manhattan implies the largest cost of running a parking
lot was "rent" so prices would be closer to a per-hour charge.

Maybe the tourists (i.e., New Jerseyites) are high demanders and bad searchers.  They also park for only part of the day, either to see a museum or to attend a meeting.  Charging a high upfront rate is a way to gouge these sorry souls.  Commuters are more price sensitive, but they account for the bulk of the parking only in other American cities; furthermore since they park for the whole day they pay the same daily price no matter how skewed the rate for the first hour.

It is very hard to tell from the ingoing sign what a Manhattan spot is really going to cost.  Yet it is an equilibrium for the price of parking to be non-transparent.  You can put on your sign "This spot is really only $25," but that is not credible.  For how many hours?  A vaguer sign will fool the fools (sounds like $20 but adds up to $40), but not irritate the regular customers and the smarter people who know better.

Might there also be a supply side explanation?

Manhattan parking is more packed in, which means an attendant has to reshuffle the cars when people come in and out.  Those labor costs are fixed, no matter how long a particular car stays in a particular spot.  So that charge is passed along to any parking visit, whether it lasts long or not. 

And is the relevant competitor to a parking house a cab or a subway ride?  The cab or subway charges by the trip, and not by how long you stay in your new location.  Might the resulting competitive equilibrium also involve a fixed, per trip charge on the part of the garage?  If a garage charges you evenly by the hour, parkers with shorter single visits will drive around and repark in different garages, rather than take cabs.  But theirs is a stupidity which the individual firm wishes to capture for itself, rather than allowing it to spread to the market more generally.  And that again means a high fixed cost for parking at all, so as to lock them in.

Note that Manhattan parking usually has open spots, even in the middle of the day.  D.C. parking does not, try finding an available midtown garage at 1:30 p.m.  Why is the value of excess capacity greater in Manhattan?  I suspect it all comes back to those naive New Jersey tourists, out for a quick joy ride to MOMA.

#31 in a series of 50.


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