Park-and-Shop Discounts and Price Bundling

Abstract

Price bundling is the term used to describe the practice of selling two or more goods or services for a single price, often involving a form of discount. Most interest in this practice has focused on its use by monopolies to pursue a form of price discrimination, though there is increasing attention being devoted to bundling in competitive service industries. In a recent article, Lan and Kanafani have demonstrated how bundling arguments can be applied to derive optimal parking prices for shoppers. The present paper is a comment on the Lan and Kanafani article. The arguments are taken further and it is argued that prescriptions for park-and-shop pricing policy need to be based on a more realistic account of competition and the role of complementarity in demand.