Thursday, August 9, 2012

Is the NY Parks Department Profit Maximizing?

The WSJ reports that the NY Parks Department doubled tennis fees and it looks like season passes will fall by about 50%. That means an elasticity of about -1. It is a little more complicated than this of course. At the same time, incomes have fallen due to the recession. Also, fewer passes mean shorter waits for courts, making a pass more attractive now. They were probably expecting inelastic demand. But an elasticity of -1 means this price increase did not change revenues.

So, it looks like the NY Parks Department is not maximizing profits. I am not sure we would want them to.

HT: Mungowitz

1 comment:

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