[sustran] Re: Driving Forces-further thoughts

ITDP mobility at igc.apc.org
Wed Jun 30 23:51:48 JST 1999


I still don't buy that private shopping center parking is subsidizing motorists
except for tax breaks for employer provided parking and in the case that
regulations are forcing developers to build more parking units than they
otherwise would, which I would guess is rare in the US.  I'm going to lay out
what I think the Neoclassical argument would be, and see if anyone is
convinced.

The Shopping Center owners will build additional units of parking so long as
the marginal revenue they receive from that last customer is greater than the
marginal cost of providing the additional parking.  If the marginal revenue of
providing that last unit of parking is less than its marginal cost, a shopping
center owner will not build it or he will be losing money.  Unfortunately, in
the U.S., bus passengers tend to be low income people.  As such, they probably
spend less at shops than motorists, so even though the marginal cost of
providing parking to them his higher, the marginal revenue earned from them is
also probably higher.   Unless the marginal revenue is lower than the marginal
cost, I don't think you have much of a case for a subsidy or an externality.

The value of the land (and the land rent) on which the shopping center sits is
largely a reflection of its accessibility.  The less people need to spend to
reach the shopping mall, (ie. if 90% of the people are able to walk to the
shopping mall), then the land rent is going to be much higher than in the case
where most peole will have to drive.

The theory of the bid-rent curve indicates that total rent plus total travel
costs will tend toward a constant in a metropolitan area.  The cheaper the
place is to reach, (ie. easy to get there by transit and bus) the higher the
rent will be.

Therefore, whatever mode you take, the cost of your access will be reflected in
the land rent and passed on to the products you buy.

>From the shopper's point of view, they will shop at the store which offers the
items they want at the lowest cost plus the lowest cost of reaching the
store.   If a store was spending more money on parking than it was receiving
from the motorists who use the parking, its prices would have to be higher than
at other stores which were more pedestrian friendly.  Thus, they would lose
their business, as these shoppers would shop somewhere else, perhaps in a
downtown shopping center without any parking.  Of course, these downtown shops
and residents of higher density areas are paying greater rent directly because
their transport costs are lower.


> Externalities (or "subsidies") can be defined in three ways:
>
> 1. Marginal
> This requires that the prices (what consumers pay directly for a good)
> reflect full marginal costs. This is the only definition to use when
> analyzing economic efficiency

Efficiency is achieved only when the price reaches a level where marginal
revenues equal marginal costs and average costs.  If the price equals marginal
revenues and marginal costs at a point below average costs, you have a strong
case for a subsidy.

Best,
Walter






More information about the Sustran-discuss mailing list