Costs and benefits of parking charges in residential areas

We develop a model for empirical evaluation of the social costs and benefits of street parking charges. From the model, we derive an expression for optimal parking charges and occupancy levels: in optimum, parking search costs are balanced against the loss of consumer surplus from unused parking spaces. Contrary to rules-of-thumb common in practice, optimal occupancy levels are not constant but depend on parking turnover rates and parking search costs. We demonstrate the model's applicability in a case study from Stockholm, where parking charges were recently introduced in suburban residential areas. The charges had considerable effects on parking demand, but our analysis shows that the overall welfare effect was a substantial welfare loss. Using parameters and demand functions estimated from the case study, we calculate optimal parking charges and occupancy levels, and show that the welfare loss arises because the introduced charges were considerably higher than the optimal ones.