Strategic Curb and Garage Pricing in Urban Parking Markets

Abstract

This paper studies a Stackelberg pricing competition between regulated public curb parking, subject to congestion, with a nearly guaranteed-access private parking garage alternative. The public authority regulator sets the curb price, anticipating the response of a profit-maximizing garage operator. We assume that users differ in both their valuation of the service and their sensitivity to waiting, leading to endogenous sorting across the two parking options. We show that pricing regulation shapes market power in a counterintuitive way. When the curb is underpriced, congestion intensifies, causing the operator to raise garage prices and to target high-value, time-sensitive users. In contrast, higher curb prices may lead to lower garage prices and welfare. The results help explain the common phenomenon of low curb prices and high garage fees, highlighting the role of curb pricing in shaping market outcomes.