Lobbying and the political economy of pricing access to commercial districts

We develop a positive theory of parking fees or cordon tolls in downtown commercial districts of cities. The model accounts for the special interests of both downtown traditional retailers and superstores at the edge of the city, and it studies how lobbying activities by such groups shapes the government’s policy. Our baseline model shows that central city retailers typically have steeper lobbying contribution schedules than superstores, so that lobbying by both groups leads the government to underprice transport in the city’s commercial district. Introducing the possibility of “multiple-stop shopping” further weakens the incentives of suburban large stores to lobby for tighter traffic measures in the central shopping street, resulting in even lower parking charges. Introducing an alternative travel mode (e.g. public transport) to the central shopping area weakens the link between profits of traditional retailers and the cost of reaching their premises by car. However, we find that, unless all consumers who shop in the traditional retail district go by public transport, our baseline results do not fundamentally change. Finally, extending the model to allow for lobbying by residents within the traditional retail district we find that residents may lobby for higher or lower parking fees, depending on the their relative concern for the vitality of the central district. As a consequence, depending on parameter values, the outcome of lobbying may produce parking fees below or above first-best levels. These results are in line with empirical observations. (*) We thank Brian Adams, Richard Arnott, Philippe De Donder, Umberto Galmarini and participants to seminars at ETH Zurich, Toulouse School of Economics, the 2014 ITEA and LAGV conferences, the 2013 UEA Meetings in Atlanta and IEB Barcelona for useful comments and suggestions. All errors are ours.