Competition and Price Discrimination: Evidence from the Parking Garage Industry
29 Pages Posted: 6 Apr 2012 Last revised: 19 Sep 2014
Date Written: February 1, 2012
We study the relationship between competition and price discrimination through an empirical examination of hourly price schedules in the parking garage industry. We find that the degree of price schedule curvature decreases with competition, implying a greater proportionate drop in low-end prices than in high-end prices when competition intensifies. Our findings suggest that competition constrains a firm’s capacity to exercise price discrimination, confirming the classic textbook theory. We also offer possible explanations for our findings, including a search cost explanation, for which we find some support in the data.
Keywords: competition, price curvature, price discrimination, consumer search, parking garage industry
Suggested Citation: Suggested Citation