Tyler Cowen responds to a reader wondering why NYC parking garages set their rates such “that the first hour is very expensive ($10-ish), but staying for the whole day is only slightly more expensive (typically about double the one hour rate). Everywhere else in the country it’s pretty much a flat rate of $X/hour give or take a bit.” The crux of his response:
Maybe the tourists (i.e., New Jerseyites) are high demanders and bad searchers. They also park for only part of the day, either to see a museum or to attend a meeting. Charging a high upfront rate is a way to gouge these sorry souls. Commuters are more price sensitive, but they account for the bulk of the parking only in other American cities; furthermore since they park for the whole day they pay the same daily price no matter how skewed the rate for the first hour.
Presumably, too, most of the “costs” of allowing someone to park in one’s garage apply irrespective of the length of the stay, since the cashier and valet have the same amount of work to do regardless.
My experience with DC parking garages is similar, by the way; the first hour is always a very high fraction of the day rate. The only exception seems to be the local airports, which often give free or nominal priced parking the first 15 or 30 minutes for those just doing quick pickups and drop-offs.