As covid looms over us, my friends and I have decided that a trip to Disney is exactly what we need when the country starts to come out of this pandemic (fingers crossed). As I look into all the festivities that Walt Disney World has to offer there was one in particular that stuck out to me- the parades. Now personally, I am not one that jumps for joy at the thought of a Disney parade, but regardless, I pay to put them on- indirectly that is. Parades can be considered a public good provided by the private market. Everyone who buys a ticket for the parks pays some amount of money towards the parades even if they don’t attend them.
An individuals utility of seeing a parade is relatively low- I.e. most people would not pay much to watch one. There are even people that don't watch them at all. However there obviously is a demand as evident by the large number of spectators at Disney parades. Disney takes advantage of the cumulative utility of all its guests to justify the expense of holding the parade. So, Disney has done an excellent job at extracting value from the cumulative marginal utility of the parades. When there are tens of thousands of people buying park tickets it only takes a very small amount per ticket to pay for the parade. (Same logic for fireworks, character meets, concerts, etc.) In this case the parades add to the overall experience and the package adds value in the guest’s mind- even if the guest doesn’t attend any of them. These extra festivities enhances the “magical” experience which is what has made Disney such a successful organization.
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We can look at the parade in another light here. A parade may add to someone’s utility, but it can also negatively affect a person’s utility. Last summer (2019), I studied at the London School of Economics for three weeks. At the end of the course, my parents flew across the pond to visit me. The weekend courses closed fell on the same weekend as a huge national parade. This weekend was about an opportunity to give my parents a taste of my life in London, and the parade had nothing to do with this. Instead of being able to walk through Trafalgar square with ease (my dorm was directly off of this), my parents and I spent about a half hour waiting to be let across the square. We were pushed into tight crowds during this time and easily killed a couple hours of our day working through the city crowds. Given that we only had the weekend together, every moment seemed integral. For us, the parade had a serious negative externality for which we received no compensation for. If the city had internalized this externality, my family would have had some sort of compensation for the decrease in our utility of the weekend. There may always be negative externalities from parades due to crowds. In this case of Disney parades, I am certain that there are some park goers that find the parades a nuisance as they would rather avoid the crowds than receive utility from the parade’s entertainment value.
The great thing about the negative externality that a Disney parade might create is that the externality is inherently internalized because the person who buys a ticket but hates parades/crowds already knows there will be parades, but still chooses to go to Disney expecting to get enough value from the other attractions that they still buy the ticket. This means that they don't need any further compensation from Disney or the other people who do enjoy parades, because they entered freely into the exchange of money for the service of being in the Disney park, and that trade creates value. Additionally, bundling causes people to pay for things they might not otherwise have bought, but they still see enough expected value from the whole bundle that they choose to purchase it. This allows Disney to offer a wide variety of "public" goods (these goods are public to everyone within the park) which creates that magical experience for a wide variety of people, and everyone who wants to collectively pays for them.
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