When you subscribe to a cable TV service, it doesn’t matter whether you’re a fan of Sean Hannity or Rachel Maddow, you’ll get a package that includes access to FOX News, MSNBC and CNN, not to mention a host of other channels that you may or may not ever watch. Even if you find Hannity (or Maddow) so vile and reprehensible that you would rather gouge your own eyeballs out rather than watch him (or her), you can’t buy a cable TV package without getting FOX and MSNBC as part of the deal. That’s called “bundling.”
Bundling is a practice in many industries. When you purchase a PC, for instance, it typically becomes bundled with a keyboard and a mouse. The economics vary from industry to industry. The practice is usually the result of private business considerations…. but not always.
An instance of bundling mandated by government regulation is parking. Jim Dalrymple, a Utah writer, offers a great example in his About Town blog.
A few nights ago I saw The World’s End at the theater in Salt Lake City’s Gateway mall. Because that theater is only a block away from my house, I walked there.
As I was buying the tickets, however, I was asked if I needed parking validation. I said no, but the clerk was apparently unaccustomed to my response because he gave me a validation ticket anyway.
And that’s when it hit me: I was paying for parking whether I was using it or not. And that’s a terrible arrangement.
Parking at the Gateway costs $3 for three hours — about the time you’d need to walk from the parking lot, buy a movie ticket, watch the previews and the movie, and get back to your car. A validation ticket makes that parking seem free, but of course it is not; the costs of building, maintaining and securing parking lots are incredibly high and are always passed on to building owners, tenants and, finally via prices, customers.
In other words, we pay more for goods and services that come with “free” parking because the costs of that parking are rolled into the prices of whatever we’re buying. This is true of all parking, of course, but the validation transaction emphasizes that parking was never free to begin with, it’s merely an obligatory add-on when buying something else.
So in my case, the movie ticket was more expensive because it came with $3 worth of parking. It’s like I was forced to buy a concession that I didn’t want.
Bundling parking, Dalrymple argues, encourages driving. “By way of analogy, if you were forced to buy a bucket of popcorn, you’d probably end up eating it, whether you originally wanted it or not. Or, to return to the cable bundling analogy, you probably watch more, say, VH1 Classics than you’d otherwise be willing to pay for a la carte because it’s there, you paid for it, so whatever, you watch it.”
De-bundling parking from the movies would provide consumers greater choice. But businesses often have no incentive to de-bundle because governments require them to offer a minimum number of parking spaces, depending upon the type of establishment. If businesses are forced to maintain the parking, they might as well bundle it. What the hell! But they pass on the higher cost to customers in the form of higher-priced movie tickets… or, in the case of residential real estate, higher rents or housing prices. People who own cars end up paying for space they don’t use, thus subsidizing the people who do drive.
Dalrymple drives home the point in a follow-up post:
Imagine, for example, that residential neighborhoods had communal parking lots where you could pay a month fee to store your car. If you choose to not have a car, you avoid the parking costs altogether. Or, if you choose to have four cars, you pay to store them for however long you need them. In either case, when your needs change, so do your parking costs.
Paying for parking by the month wouldn’t be fun, of course, but if homes were $20,000 cheaper it might suddenly seem like a pretty awesome deal.
The culprit, he writes, isn’t the market. “It’s laws and ordinances that distort the market.”