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Regulating on-street parking

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  • Calthrop, Edward
  • Proost, Stef

Abstract

Consider the choices available to a shopper driving to a city and trying to park downtown. One option, typical to many cities, is to follow the signposts to an off-street parking facility, which is often privately operated. Another option is to search for an on-street spot. If this proves unsuccessful, it is always possible to return to the off-street facility. We formalise such a setting and examine optimal on-street parking policy in the presence of an off-street market. Not surprisingly, the amount of socially-wasteful searching behaviour is shown to depend on the prices of both the off- and on-street market. If the off-street market is run competitively, optimal on-street policy reduces to a simple and attractive rule: set the on-street price equal to the resource cost of off-street parking supply. Other pricing rules result in either excessive searching behaviour or excessive off-street investment costs. Time restrictions - a common alternative to on-street fees - are also shown to be inefficient. In practice, however, off-street markets are unlikely to be competitive. We examine the case of a single off-street supplier playing as a Stackelberg follower to the government regulated on-street market. Based on a numerical example (calibrated to London), optimal on-street policy is shown to either involve setting a relatively high on-street price, such that the monopolist is induced to undercut and gain the entire parking demand, or setting a relatively low price, while the monopolist maximises profit on the residual demand curve. Which strategy is optimal is shown to be parameter dependent.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 36 (2006)
Issue (Month): 1 (January)
Pages: 29-48

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Handle: RePEc:eee:regeco:v:36:y:2006:i:1:p:29-48

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References

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  1. Richard Arnott & John Rowse, 1997. "Modeling Parking," Boston College Working Papers in Economics 350., Boston College Department of Economics.
  2. Edward Calthrop & Stef Proost, 2002. "Regulating on-street parking," Energy, Transport and Environment Working Papers Series ete0202, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment.
  3. Guesnerie Roger & Roberts Kevin, 1980. "Effective policy tools and quantity controls," CEPREMAP Working Papers (Couverture Orange) 8014, CEPREMAP.
  4. Sundaram,Rangarajan K., 1996. "A First Course in Optimization Theory," Cambridge Books, Cambridge University Press, number 9780521497190.
  5. Carl Davidson & Raymond Deneckere, 1986. "Long-Run Competition in Capacity, Short-Run Competition in Price, and the Cournot Model," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 404-415, Autumn.
  6. Sundaram,Rangarajan K., 1996. "A First Course in Optimization Theory," Cambridge Books, Cambridge University Press, number 9780521497701.
  7. Anderson, Simon P. & de Palma, Andre, 2004. "The economics of pricing parking," Journal of Urban Economics, Elsevier, vol. 55(1), pages 1-20, January.
  8. Glazer, Amihai & Niskanen, Esko, 1992. "Parking fees and congestion," Regional Science and Urban Economics, Elsevier, vol. 22(1), pages 123-132, March.
  9. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1991. "A temporal and spatial equilibrium analysis of commuter parking," Journal of Public Economics, Elsevier, vol. 45(3), pages 301-335, August.
  10. Verhoef, Erik & Nijkamp, Peter & Rietveld, Piet, 1995. "The economics of regulatory parking policies: The (IM)possibilities of parking policies in traffic regulation," Transportation Research Part A: Policy and Practice, Elsevier, vol. 29(2), pages 141-156, March.
  11. De Vany, Arthur S & Saving, Thomas R, 1977. "Product Quality, Uncertainty, and Regulation: The Trucking Industry," American Economic Review, American Economic Association, vol. 67(4), pages 583-94, September.
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