Pricing the Curb Parking

2.2 Pricing the Curb Parking

An economic analysis of curb parking addresses mainly the issues related to the quantity and the price (Inci, 2015). Curb parking spaces, in the short run, are fixed in supply; and market prices for curb parking can ensure its efficient allocation (Shoup, 2017, p. 508). To allocate such resource efficiently, Goodwin (2001, p. 29) distinguished between two strategies which focus on getting the right price and having the appropriate traffic volume respectively. These two strategies are called the price and the quantity approaches to dealing with externalities.

The first strategy was to “get the prices right: where travel is currently undercharged, getting the price right will reduce traffic.” A price for parking is a user fee; it is paid only by drivers who occupy valuable land and only in proportion to the time they occupy curb spaces (Shoup, 2017, p. 508). The undercharged curb parking will encourage vehicle travels; whereas, the overcharged curb parking shift travelers from driving to walk, cycle or ride public transit. Thus in Arnott and Inci’s (2006) “bathtub model,” a right price for curb spaces are discovered to reduce the phenomenon of cruising and remedy the external cost caused by on-street parking. However, unlike general merchandise which demand stays the same for a duration, the parking demand varies drastically just in a day. Managing the traffic by uniform pricing for curb spaces is impractical. Nor can urban planners adjust the parking vehicle-storing capacity in the short run to clear the market.

Hence, Goodwin’s (2001) second strategy is to decide how much traffic we want in the beginning and then use a demand-responsive price to achieve it. Since all vehicles

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parked or in traffic occupy spaces, the proposition of setting the traffic volume often transforms into the determination of the right parking occupancy. In Shoup’s (2017, p.

297) research, an efficient and equitable occupancy rate usually empties about 15 percent of curb spaces to ensure easy entry and exit. The right price, which clears the market, emerges as a result in response to the target occupancy rate. Because such parking fee reflects drivers’ parking demand and reveals essential information about what drivers think parking spaces are really worth, demand-responsive prices for curb parking is an analogy of spot prices for land.

However, market prices can ensure the efficient allocation of on-street parking, but not the full use of curb spaces (Shoup, 2017, p. 549). That is, performance pricing aims at a target occupancy rate that is predetermined by the traffic rules of thumb but does not resolve the optimal parking occupancy. Demand-responsive pricing, first, alters the market demand; then, due to the fixed parking supply in short run, occupancy rate increases or declines to meet the target. Hence, what market prices bring about is the allocation efficiency of curb parking.

In 2011, Shoup carried out a radical experiment with performance parking-price in San Francisco. While adopting this price reform, administrators aim at optimizing curb parking’s occupancy rate, but not maximizing the profit as monopolists. Meanwhile, performance pricing is not the price discrimination because different drivers pay the same price for parking on the same block at the same time. This pricing technique improved the fairness as well as the transportation efficiency unexpectedly. On the one hand, the market prices are fair. Charging demand-responsive prices for curb parking

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and spending the revenue to pay for public services will redistribute the income to help poorer households without cars. On the other hand, performance pricing increases the efficiency. This pricing method reduces traffic congestion and makes considerable progress to solve vital problems of severe overcrowding on some blocks and very low occupancy on others (Pierce & Shoup, 2013). In general, performance pricing ensures the efficient allocation of curb parking; and the full use of curb spaces improves the land use efficiency.

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In the past, most people considered curb parking to be a free entitlement provided by the government. The attention paid to on-street parking is always about the transportation aspect. Several researchers noted that free on-street parking embodies the concept of the tragedy of commons. The overconsumption of curb spaces creates problems such as the time waste for cruising, traffic congestion, and air pollution.

Nevertheless, Shoup (2017) remarked that the on-street parking resembles more a private good due to its rival characteristic. One curb space can only serve one car at a time, and every parked vehicle occupies a parcel of land. The parking problem is not only a transportation concern but essentially a land use matter. We conclude two intriguing results from the literature as follows.

1. Pricing the curb parking to improve the land use efficiency

Charging the on-street parking is often viewed as an approach to resolve the ensuing traffic chaos in numerous past studies. Shoup (2017), however, regarded parking fees as a fiscal policy of collecting land rents. If land rents are a product of the exclusive use of land, it can be more precisely defined as the Marxian monopoly rent (Evans, 1991).

In the case of curb parking, parking fees are a form of monopoly rent since the government holds the decisive power of parking planning exclusively. Therefore, pricing the curb parking is an approach not just to eliminate the traffic externalities but to improve the land use efficiency.