Economics of Transportation

Economics of Transportation ()
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Economics of Transportation
journal homepage: www.elsevier.com/locate/ecotra
A review of the economics of parking

Eren Inci n
Sabanci University, Faculty of Arts and Social Sciences, Orhanli/Tuzla, 34956 Istanbul, Turkey
art ic l e i nf o
a b s t r a c t
Article history:
Received 27 May 2014
Received in revised form
30 September 2014
Accepted 15 November 2014
This paper reviews the literature on parking with an emphasis on economic issues. Parking is not just
one of the most important intermediate goods in the economy; it is also a vast use of land. Many
theoretical and empirical papers analyze the quantity and pricing of parking by concentrating on
particular aspects of the issue. The aspects covered in this review are cruising for parking, spatial
competition, (minimum and maximum) parking requirements, parking pricing and road pricing in the
bottleneck model, and temporal-spatial pricing. Various forms of parking, including residential parking,
shopping mall parking, and employer-provided parking, are also reviewed before identifying understudied topics that should be on the research agenda.
& 2014 Elsevier Ltd. All rights reserved.
Keywords:
Congestion
Parking
Parking policy
Pricing
Trafc
1. Introduction
Economists come up with ideas to deal with imperfect markets,
but the market for ideas in economics can be as imperfect as any
other market. What is believed to be of general interest to economists is sometimes not important in real-world transactions; and
what can have a great impact on the welfare of the many does not
always attract the level of attention it deserves. The economics of
parking is an example of the latter imperfection. Few economists
devote full-time effort to analyzing parking markets, even though
the economics of parking has a lot to say about how to improve the
quality of urban life. There is also a dearth of parking studies in
transportation science, transportation engineering, and urban planning. Despite the facts that cars are parked 95% of the time (Shoup,
2005b, p. 624) and that vast amounts of land are used for parking
(Jakle and Sculle, 2004), more ink has been spilled trying to deal
with the problems caused by cars when they are in motion than
when they are parked. In fact, cars create perhaps less visible but
equally serious problems when parked, as Shoup (2005b, p. 625)
points out in his landmark book The High Cost of Free Parking.
Most transportation activities are initiated by getting into a
parked vehicle and terminated by parking it again. This makes
parking one of the most important intermediate goods in the
modern market economy, after money and credit cards (Hasker
and Inci, 2014). Realizing this should be sufcient to help us
understand why an economic analysis of parking is vitally important. As Arnott and Inci (2006) state, early work on the problem
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E-mail address: ereninci@sabanciuniv.edu
treated parking only as a cost added on at the end of a trip, which, as

a xed cost, does not really affect decisions at the margin. Later work
on the pricing of parking, however, has repeatedly shown that this
approximation limits generality (see, e.g., Glazer and Niskanen, 1992;
Anderson and de Palma, 2004, 2007; Arnott and Inci, 2006, 2010). In
addition to being an important intermediate good, parking is also a
major use of land in any country, city, or town. All vehicles, whether
parked or in trafc, occupy space. It is eye-opening to visualize the
total amount of land that is taken up by parking. In the United States,
it is at least as large as the total land area of the state of
Massachusetts, and in Europe, it is at least one-half of the entire
land area of Belgium. Now consider how the mispricing of parking
can distort land use, car usage, and the pricing of other goods.
Only 79 years have passed since a driver fed a parking meter for
the rst time.1 This review aims to increase awareness about the
high potential for work on parking to immediately improve citydwellers' welfare.2 The existing work in economics, transportation
science, transportation engineering, and urban planning looks at
parking from various angles. In this review, I concentrate only on
its economic aspects. These aspects address mainly the issues
1
The rst parking meter was installed in Oklahoma City on July 16, 1935. The
original motivation of Carl Magee, the inventor of the parking meter, was to
encourage parking turnover, not to collect revenue.
2
Arnott (2011) provides another discussion of the economics of parking in
which he lists some empirical regularities and briey reviews the existing
literature. He also applies the standard transportation microeconomic theory to
parking and touches on selected issues in parking policy, one of which is parking
freeze (i.e., maintaining the supply of parking at the same level as it were prior to a
specied date), which I do not cover in this review. Other than that, I provide a
more extensive and recent literature review.
http://dx.doi.org/10.1016/j.ecotra.2014.11.001
2212-0122/& 2014 Elsevier Ltd. All rights reserved.
Please cite this article as: Inci, E., A review of the economics of parking. Economics of Transportation (2014), http://dx.doi.org/10.1016/j.
ecotra.2014.11.001i
E. Inci / Economics of Transportation ()
related to the quantity and price of parking. Various distortions in

the parking market need to be taken into account to determine
optimal parking quantity and price. These distortions naturally
determine the scope of this review.
If curbside (i.e., on-street) parking demand exceeds curbside
parking supply, some drivers cannot immediately nd a vacant
parking space; thus cruising for parking will emerge, which
imposes external costs on all drivers by increasing congestion.
Section 2 reviews the papers that analyze this important phenomenon. Another distortion is the parking garages' market power,
which stems from the fact that they are discretely spaced throughout the city. Section 3 reviews the papers focusing on spatial
competition in the parking market and parking garages' exercise of
market power. In most cities, zoning regulations specify how much
parking has to be supplied by each land use. Because these
regulations are usually adopted ad hoc from city to city, they
signicantly distort parking supply and thus land use. Section 4
reviews the papers on such zoning regulations. Yet another source
of distortion is underpriced (in fact, for most cities, unpriced)
congestion. Section 5 reviews the literature linking parking prices
to road prices by embedding parking into bottleneck models.
Vickrey's (1954) wisdom was to charge different parking prices
across time and space, which was less feasible given the technology of that time. Today we see a general movement toward such
temporal-spatial pricing. Section 6 outlines the efforts in that
direction. Underpriced parking is particularly an issue for some
special forms of parking. Employers often provide parking to
employees at no cost, shopping malls typically provide parking
to their customers for free, and cities provide parking to residents
at nominal prices lower than market prices. Section 7 briey
reviews the work on these parking forms. Section 8 identies
some under-researched topics.
2. Cruising for parking

One of the most studied topics in the economics of parking is the
phenomenon of cruising for parking, which is a typical example of the
tragedy of the commons. Parking spaces are overdemanded if they are
underpriced (or free), and no one cares about his contribution to
others' travel time while cruising for parking slowly around the block.
Shoup (2005b, Ch. 14) recites from his eld study in the 1980s that
drivers lose about 100,000 hours (over 11 years) while cruising for
parking in a given year on a 15-block business district near the UCLA
campus. Shoup (2006) reports the ndings of 16 different studies
done between 1927 and 2001 in congested downtown areas from
around the world. According to these studies, between 8 and 74
(on average 30) percent of all cars in trafc are cruising for parking,
and they spend between 3.5 and 14 (on average 8.1) minutes on that
activity. Cruising for parking is an inefcient transport activity. Cars
slow down trafc while they are cruising for parking and thus
contribute to trafc congestion disproportionately more than cars in
transit. Cars cruising for parking increase fuel consumption and
contribute to air pollution via carbon emissions. They may even
increase the probability of trafc accidents. How to decrease cruising
for parking has been at the top of the agenda in the literature.
Researchers have constructed a series of parking models to
analyze the economic effects of cruising for parking. It is in fact a
search externality. If there are no available parking spots near a
driver's destination, he will search for one. There are many ways to
search for a parking spot.3 However the driver searches, this
3
One may drive around the destination block until a parking spot becomes
available; one may drive farther away from the destination to locations where the
parking demand is relatively lower and then walk to his destination; one may even
wait at the destination until someone leaves a nearby parking spot. Guo et al.
activity involves at least some time costs. Search time is an

increasing function of how many others are searching and how
long they park (see, e.g., Glazer and Niskanen, 1992; Inci and
Lindsey, 2014). The presence of cruising for parking shows that
drivers' willingness to pay exceeds the price of parking; thus a
standard rationing problem arises, which may result in substantial
welfare losses. The drivers cruising for parking usually drive more
slowly than cars in transit; thus they slow down trafc, which
imposes external costs on all drivers. Any efcient parking pricing
scheme should internalize this externality.
Arnott and Inci (2006) developed the rst bathtub model4 of
downtown parking, via which they analyze the effects of cruising
on trafc and provide parking pricing recommendations to
remedy the problems it causes. They envisage a spatially homogeneous downtown area, which simplies the analysis by making
the density of trafc uniform over the space. One can imagine a
grid network of streets like that of Manhattan. Curbside parking is
the only option and drivers are identical. A driver enters the
downtown area, drives to his destination, and immediately parks
there if there is an empty parking spot. If there are no empty
parking spots, he cruises around the destination block until he
nds one.
In this bathtub model, there are three pools at any time. Arnott
and Inci (2006) analyze the steady state of the model. Cars rst
enter into the pool of cars in transit, represented by T per unit area,
by driving to their destinations. The inow rate into the in-transit
travel pool is given by demand function D per unit area. Because
the in-transit trip length is m and the travel time per mile is t, the
outow rate from the in-transit travel pool is T/mt. Those who exit
the in-transit travel pool enter into the pool of cars cruising for
parking, represented by C per unit area. Thus, the outow rate
from the in-transit pool is also the inow rate into the pool of cars
cruising for parking. Because there are P parking spaces per unit
area and each car parks for a xed visit of l hours, the exit rate
from the pool of cars cruising for parking is P/l. Finally, cars exiting
the pool of cars cruising for parking nd a parking spot and thus
enter the pool of parked cars. They stay in the parking space for l
hours and then exit the downtown area. The exit rate per unit area
is also P/l.
Demand D is a function of expected full price of a trip F, which
equals in-transit travel time costs, given by mt, where is the
value of time, plus cruising-for-parking time costs, given by
Cl=P, plus the total parking fee, given by , where f is the hourly
parking fee:
Cl
F mt fl:
P
In-transit travel time per mile, t in other words the congestion

function depends on the number of cars in transit per unit area, T,
the number of cars cruising for parking per unit area, C, and the
number of parking spaces per unit area, P: t tT; C; P. It is assumed
(footnote continued)
(2013) analyze the parking search behavior from a behavioral economics perspective. They compare the performance of a static game-theoretical model where
drivers are completely rational with that of a model with rational and irrational
types in terms of parking search behavior. In particular, they take into account
optimistic and pessimistic behavior in parking search. They calibrate their model by
using a genetic algorithm on video observations from some parking lots on a
university campus and use this model to predict behavior on other parking lots. It
turns out that the behavioral model performs more accurately than the rational
game-theoretical model. There is also an extensive operations research literature
on parking search (see, e.g., Teodorovic and Lucic, 2006 and the references therein).
4
See Arnott (2013) for a description of bathtub models. The bathtub analogy
was coined by William Vickrey in an unpublished draft found after his death.
Inspired by the hydrodynamic models, cars entering the trafc network are
modeled as water owing into a bathtub, cars exiting from it as water owing
out of a bathtub, and the density as the height of the water in the bathtub.
ecotra.2014.11.001i
that a car cruising for parking contributes to trafc congestion at least

as much as a car in transit.
In the steady state of this model, the inow into the pool of cars
in transit equals the outow from that pool,
DF
T
;
mt
and the inow into the pool of cars cruising for parking (which
equals the outow from the cars in transit) equals the outow
from the cars cruising for parking,
T
P
:
mt l
Substituting for tT; C; P and F yields two equations in T and C:

Cl
T
4
D mt fl
P
mtT; C; P

T
P
:
mtT; C; P l
Given P, the rst equation gives the locus of T and C such that
demand inow equals parking outow, so that the size of the
in-transit pool remains steady. Arnott and Inci (2006) call this the
demand locus. The second equation gives the locus of T and C such
that the outow from the in-transit pool equals the outow from
the parking pool, so that the size of the cruising-for-parking pool
remains steady. Arnott and Inci (2006) call this the cruising-forparking locus. The intersection of the two loci gives the steadystate equilibrium.
One can easily transform the problem into a supply-demand
space, which is more relevant to this review. Fig. 1 does the job,
which is drawn for a xed curbside parking capacity. The counterpart of quantity in this analysis is throughput, which is dened to
be T/mt and is shown on the x-axis. Since cars cruising for parking
just circle around the destination block, they do not contribute to
throughput (but they do contribute to ow). Trip price is shown on
Trip Price
Supply
Demand
Parking Capacity
Constraint
E2
the y-axis. As explained in detail by Arnott and Inci (2010), just as

in the well-known trafc ow analysis without parking, the supply
curve here is also backward bending.5 However, throughput
cannot be higher than parking turnover rate, and hence the region
of the supply curve above this constraint, which is called the
parking capacity constraint, is replaced by the constraint itself. As a
result, we get a modied backward-bending supply curve, shown
in bold in the gure. The intersection of the demand curve with
the (modied) supply curve gives various equilibria; in this case
E1, E2, and E3, where E3 corresponds to gridlock equilibrium with
zero throughput and innite trip price and thus cannot be
depicted. E4 would have been an equilibrium if the parking
capacity were binding beyond the throughput level associated
with E4, but in the current gure it is not. Arnott and Inci (2010)
provide a detailed stability analysis of these equilibria along with
their dynamics.
We can now show how cruising for parking can distort the
parking market. Consider panel (a) of Fig. 2, which undertakes a
welfare analysis of equilibrium E1 shown in Fig. 1. If the parking
capacity constraint was not binding, the equilibrium would occur
at the intersection of the user cost curve and the demand curve.
But it does bind, and thus the equilibrium occurs at the intersection of the parking capacity constraint and the demand curve.
With priced (but underpriced) parking, the user cost shifts upward
but the equilibrium remains at E1. As a result, some cruising for
parking will occur, although some parking revenue is collected.
Thus, the parking pricing shown in this panel is still associated
with welfare losses. As shown in panel (b) of Fig. 2, if the
government increases the parking fee such that the user cost
curve shifts upward to cut the demand curve at its intersection
with the parking capacity constraint, the equilibrium price and the
consumer surplus remain unchanged but the parking revenue
increases. Moreover, cruising for parking is just eliminated at this
point, which is where the optimal parking fee is obtained. So, by
increasing the parking fee to the point where cruising is eliminated, the government converts welfare losses dollar for dollar to
parking fee revenue and collects revenue with no burden at all.6
This line of reasoning is extended by Arnott and Rowse (2009) and
Arnott and Inci (2010) to show how double or even triple
dividends emerge from increasing parking fees.7
Arnott and Inci's (2006) model contains only curbside parking.
Calthrop and Proost (2006) concentrate on the optimal regulation
of curbside parking spaces when off-street garage parking is also
available as a perfect substitute. They underline the importance of
the dependence of optimal regulation on the pricing of the rival
facility, in this case garage parking. If the garage parking fee is
higher than the curbside parking fee, there will be wasteful search
for curbside parking spaces, which is a form of a dissipative
activity to equilibrate full prices of both modes of parking. If, on
the other hand, the garage parking fee is lower, the curbside will
be underused and thus there will be excessive supply costs. As a
result, with constant returns to scale and a competitive parking
garage market, the optimal regulation equalizes the full prices.
Calthrop and Proost (2006) also show that a particular time
E1
E4
Throughput
Fig. 1. Demand and supply analysis when there is curbside parking.

Note: An equilibrium type that cannot be shown on the diagram is E3 with zero
throughput and innite trip price.
5
The easiest way to understand why the supply curve is backward bending is
to think about the extreme case of zero throughput. It can either correspond to the
case in which there are no cars on the road or there is a gridlock. In a similar
fashion, there are two velocities associated with a given level of throughput for all
other levels of throughput, except for the capacity throughput. Hence, the supply
curve is backward bending.
6
At this point, the reader should also see Shoup (2004), which reviews various
other arguments about why parking is the ideal source of local public revenue.
7
These models treat parking search as a deterministic process. In reality,
drivers face uncertainty about unoccupied parking spaces, which results in some
level of cruising even in a social optimum. Such concerns are considered toward the
end of this section.
ecotra.2014.11.001i
Trip Price
Trip Price
Demand
Demand
Parking Capacity
Constraint
Parking Capacity
Constraint
Consumer
Surplus
Consumer
Surplus
E1
User Cost + Optimal Parking Fee
E1
User Cost + Parking Fee
Efficiency Loss
Due to Cruising
Parking
Revenue
User Cost
User Cost
Parking
Revenue
In-transit Travel
Cost
0
In-transit Travel
Cost
Throughput
Throughput
Fig. 2. Efciency loss due to cruising for parking and optimal pricing of parking.
restriction policy, according to which one can park for free up to a

xed amount of time and then has to depart, is inferior to optimal
price regulation in terms of social welfare. They also analyze a
Stackelberg model where the government is the market leader and
show that the result of matching the curbside parking fee no
longer holds.
Arnott and Rowse (2009) extend the base model in Arnott and
Inci (2006) by introducing garage parking, which can be used
without contributing to trafc congestion. The garage operators
are assumed to be operating competitively, and thus the garage
parking fee, c, is equal to the garage parking resource cost.
Moreover, by assumption, the curbside parking fee is lower than
the garage parking fee (i.e., f o c). As in Calthrop and Proost (2006),
the excess demand for curbside parking is rationed through
cruising for parking until the full prices of the two parking modes
are equalized to each other:
cl fl
Cl
P
where the left-hand side is the total parking fee paid by a driver
who parks in the parking garage for a duration of l hours and the
right-hand side is the total curbside parking fee paid by a driver
who parks curbside for the same duration plus his time costs of
cruising for parking. One immediate implication of this equalization is that there will be cruising for parking in equilibrium as long
as there is a differential between curbside and garage parking fees.
This model ts nicely into US cities where garage parking fees
are considerably higher than curbside parking fees. Nevertheless,
the distortion here is caused only in the curbside parking market
as garage operators are assumed to be exercising marginal cost
pricing. If the market power of parking garages is incorporated
into the model, the garage parking fees will probably be higher,
and thus the differential between them and curbside parking fees
will also be higher. As a result, the levels of cruising for parking
will increase even more. I review the work analyzing the market
power of garage operators in Section 3.
To simplify the analysis, Arnott and Rowse (2009) assume that
trip demand is perfectly inelastic. Arnott et al. (2013) go one step
further by allowing trip demand to be elastic. Their extension

further modies the backward-bending supply curve, and thus
several different types of equilibria emerge. Arnott et al. (2013)
work on the welfare properties of these parking equilibria and
equilibrium dynamics. More importantly, they analyze curbside
parking capacity choice in detail when garage parking supplements curbside parking and when it does not, and when curbside
parking is priced efciently and when it is not.
ArnottInciRowse type bathtub models provide some general
lessons. First of all, cruising for parking can create substantial
welfare losses that can be diminished, if not eliminated, by
effective parking pricing. Second, if curbside parking is underpriced, parking fees should be increased until cruising for parking
is eliminated. Third, pricing is not the only tool that local governments have to address failures in the parking market, especially in
the long run. Arnott et al. (2013) show how to deal with them by
adjusting parking capacities. It is also evident from these models
that downtown travel and parking will have various equilibria. But
the trafc will never be in a steady state due to stochastic shocks,
regular daily uctuations in parking demand, etc. Nevertheless,
this does not render steady-state analysis useless. By looking at
steady states, we can understand the tendency of trafc toward
any particular trafc equilibria. Using comprehensive stability
analysis, Arnott and Inci (2010) and Arnott et al. (2013) show
how such tendencies and transitions occur. In that sense, they
explain why trafc can result in a trafc jam today but not
yesterday, even though trafc conditions on both days are very
similar.
The ArnottInciRowse line of models ignore the contiguity of
parking spaces by assuming that the downtown area is spatially
homogeneous, in which downtown parking is either completely
saturated or completely unsaturated. As Martens et al. (2010)
argue in detail, in reality, there is a gradual transition from
completely unsaturated parking to completely saturated parking,
during which some streets may become saturated before others.
Cruising for parking will emerge on those streets that have
become completely saturated, while parking will remain unsaturated on the other streets. Levy et al. (2012) show that spatial
ecotra.2014.11.001i
heterogeneities become very important for occupancy levels above

92% by comparing the analytical simulation model PARKANALYST
(Levy et al., 2012) with the agent-based geosimulation model
PARKAGENT (Benenson et al., 2008), which is able to deal with
spatial heterogeneities in the downtown area and can describe the
parking dynamics in full. Gallo et al. (2011) offer some other ways
to simulate cruising for parking in an assignment model of urban
road networks.
The theory on cruising for parking largely assumes underpriced
curbside parking. As discussed before, cruising for parking will
exist as long as there is a differential between the full prices of
curbside and garage parking. The optimal policy in those cases is
to increase the curbside parking fee until cruising for parking is
just eliminated. Nevertheless, in some countries, such as Belgium
and the Netherlands, curbside and garage parking fees are very
close. Cruising for parking occurs even in this case because of
drivers' uncertainty about unoccupied parking spaces.8 Nevertheless, one should expect lower levels of cruising for parking in
such circumstances. To quantify cruising for parking in such
situations, van Ommeren et al. (2012) look at a nationwide Dutch
dataset. They nd that about 30% of all car trips involve some level
of cruising. The average trip time is 20 min in their dataset, and on
average only 36 s of that trip time are taken up by cruising. They
also concentrated on the determinants of cruising for parking, and
their results are completely in line with the cruising theory
outlined above. Their results show that, although the current level
of cruising for parking is low in the Netherlands, better parking
pricing could decrease it further. By making use of the capitalization of outside private parking spaces into the house prices and
the waiting lists for curbside parking permits, van Ommeren et al.
(2011) estimate the cost of cruising per resident to be about 1 Euro
per day in Amsterdam.
3. Spatial competition in the parking sector

In urban areas, parking garages compete spatially with each
other and with curbside parking spaces. Several empirical papers
examine competition in the parking market (Froeb et al., 2003;
Chone and Linnemer, 2012; De Nijs, 2012; Kobus et al., 2013; Lin
and Wang, forthcoming).9 One of the robust observations of these
studies is that drivers do not want to walk more than a few blocks
from where they park to their destination. This gives parking
garages local monopoly power. Another nding is that, although
8
Parking information systems can be very useful in mitigating this kind of
parking search activity. There is an extensive literature developing smart parking
guidance algorithms (to name just a few: Caicedo, 2009, 2010 and Shin and Jun,
2014).
9
Froeb et al. (2003) provide numerical experiments showing how capacity
constraints in merging and non-merging parking lots inuence merger effects and
propose a demand estimator that can recover model parameters from the data.
Chone and Linnemer (2012) apply their treatment and control group selection
methodology for retrospective merger evaluation to the merger that took place
between two large French conglomerates. The merged rm became the leading
parking operator in France. They nd that the merger led city-owned parking lots
that are exposed to the merger to increase their hourly parking fees by about 3%
relative to the others that are unexposed. In some sense, they underlined the
spatial interdependence in the parking sector even when two parking lots are not
directly competing with each other (Inci and Lindsey , 2014, theoretically underline
this indirect competition effect as well as the direct competition effect). By
concentrating on the same merger and using the same methodology in selecting
the parking lots exposed to the merger, De Nijs (2012) shows that the level of price
discrimination in the market increased in response to the merger in the sense that
low-end prices in the parking price schedule increased proportionally more than
the high-end prices. By making use of the difference between the parking search
behavior of short- and long-term parkers, Lin and Wang (forthcoming) show a
symmetric result in their analysis of parking garages in Manhattan. In particular,
they show that when competition increases, the low-end prices decrease proportionally more than high-end prices so that the price schedule becomes less curved.
exceptions exist, parking fees are generally concave in parking

duration. That is, hourly parking fees are lower the higher the
parking duration, which hints at price discrimination in the
sector.10 As a matter of fact, third-degree price discrimination is
likely to be operational when travelers differ substantially in their
desired parking durations, and second-degree price discrimination
is likely to be operational for individuals choosing between
adjacent time durations.
A number of theoretical papers deal with various spatial
aspects of parking markets. Arnott (2006) is probably the most
comprehensive. It analyzes downtown parking policy by modeling
spatial competition between parking garages. The paper rst
underlines that horizontal economies of scale in garage parking
stem from the fact that the central ramp in a parking garage
entails a xed cost. Due to these horizontal economies of scale,
parking garages are discretely spaced. A driver cares about his
walking time costs, and thus he is willing to pay a premium to
park in a closer parking garage. As a result of parking garages' local
market power, garage parking fees will be inefcient, just like the
spacing between them. Arnott (2006) mentions that optimal
parking pricing should take such effects into account. The base
model of the paper applies only to garage parking but it is later
extended to include curbside parking. In that extension, the full
price of garage parking gets equalized to the full price of curbside
parking via adjustments in the level of cruising for curbside
parking. As in Arnott and Inci (2006), increasing curbside parking
fees until cruising for parking is just eliminated (without parking
getting unsaturated) has the benet of decreasing overall trafc
congestion. The paper also discusses how availability of mass
transportation affects its main insights.
Arnott and Rowse (1999) is one of the inuential papers in the
literature dealing with stochasticity of parking vacancy, which
results in cruising for parking. In their model, the city is located
around a Salop circle. The number of parking spaces is xed per
unit distance. Individuals wait at home for trip opportunities,
which exogenously arrive according to a stochastic time-invariant
process. An individual may or may not accept a trip opportunity; if
he accepts it, he decides whether to walk or drive to the
destination. If he drives, he decides how far from his destination
to start cruising for parking. Once he nds a vacant parking spot,
he immediately parks there and walks to his destination. The
expected walking distance depends on the average density of
vacant parking spaces, which is endogenously derived in the
model. The market outcome is inefcient because no one cares
about his own contribution to this average density. Arnott and
Rowse (1999) conclude that optimal parking fees may not achieve
optimality as a result of multiple equilibria. This is an important
insight underlining the difculties associated with implementing
parking policy in practice.11
Anderson and de Palma (2004) present another spatial model
of parking with search. In their model, a central business district
(CBD) is the most desirable parking location, and shoppers are
located at the other end of a Hotelling line. Parking is provided on
side streets that are perpendicular to the main street. It gets more
difcult to nd a parking vacancy if there are more parkers. The
10
In addition to the price discrimination due to (spatial or non-spatial) market
power in the parking sector, the discreteness in parking prices can be due in part to
difculties for the parking staff or the parking meters to charge for shorter
durations. In many cities, parking fees are set for hourly increments (1 h, 2 h, 3 h,
and so on). This discreteness in and of itself distorts parking durations. Caicedo
(2012) analyzes what happens if parking fees are charged by blocks of minutes
rather than blocks of hours from the perspective of parkers, nearby merchants, and
parking operators.
11
Another well-known spatial treatment of parking fees is provided by Arnott
et al. (1991), which I review in Section 5 because it mainly deals with trip
generation in the famous bottleneck model.
ecotra.2014.11.001i
most desirable parking spaces are the ones closer to the CBD and
thus these are overused, while the spaces further away from the
CBD are underused. As a result, optimal parking prices are higher
the closer one parks to the CBD. The socially optimal parking fee
corresponds to the parking fee chosen by private parking operators that monopolistically compete with each other, as would be
the case in any Coasian environment. This result, of course,
requires the parking operators to be small enough so that they
take the utility of drivers as given, but big enough to internalize
local externalities due to parking congestion. Thus, privatization
yields the same outcome as the socially optimal outcome. The only
externality that cruising for parking creates is on parkers in this
base model. Anderson and de Palma (2004) show that this result
no longer holds when cruising for parking imposes externalities
on through trafc as well as on parkers. In a companion paper,
Anderson and de Palma (2007) embed their spatial setting into a
monocentric city model with commuters and endogenous land
use. In this setting's equilibrium, individuals who live closer to the
CBD prefer to walk to the CBD, while those who live further away
drive to a parking lot and then walk to the CBD. Provided that
cruising for parking does not impose externalities on through
trafc, in this extension, too, the social optimum is reached if
parking garage operators set prices in a monopolistically competitive fashion.
Most theoretical papers analyze parking markets by assuming
hourly uniform parking fees. However, spatial competition in the
parking market results in parking garage operators charging
differentiated parking prices (remember that empirical papers
usually nd parking fees to be concave in parking duration).
Parking garages are in spatial competition not only with each
other but also with curbside parking spaces. They are mostly
privately operated, while curbside parking spaces are mostly
publicly operated.12 Even the curbside parking fees are differentiated in some cities (for example, Istanbul). Inci and Lindsey
(2014) try to move toward realism by incorporating these features
into their model. In their model, two different types of drivers
wish to park for different durations. Unlike in standard Salop circle
spatial competition models, the utility derived from curbside
parking (which is the outside option to garage parking) is
decreasing in the number of drivers who use curbside parking,
and thus it is endogenously determined.13 Inci and Lindsey (2014)
show that, with inelastic parking demand, charging differentiated
curbside parking fees achieves the social optimum without needing to regulate garage parking fees. In cases with partial segregation of driver types in terms of parking duration, uniform hourly
curbside parking fees can also achieve full efciency. Inci and
Lindsey (2014) also considered direct regulation of parking garages, in which case the social optimum can be achieved as long as
an appropriate differential between curbside and garage parking
12
Tsai and Chu (2006) provide a (non-spatial) model with both public and
private management of parking spaces. In their model, rst the government acts as
a Stackelberg leader by allocating the xed amount of parking supply between
public and private management. Then, both the government and the private
company set their parking fees. Finally, drivers choose whether to park, and if so,
whether to park in a public or private parking space. It is reasonable to assume that
private management is more efcient because the private rm has high incentive to
record the parking time very quickly to be able to maximize its prots. In the end,
the government forms a mixed market where some spaces are privately managed
with franchise-type contracts while others are publicly managed.
13
This results in various nonconvexities. So, if a parking garage increases the
parking fee aimed for a long-term parker, some long-term parkers switch to
parking curbside. This means that there will be more cruising for curbside parking,
which in turn increases the full price of curbside parking for short-term parkers. As
a result, some short-term parkers switch to parking in a parking garage, which
allows garage operators to increase parking fees for short-term parkers, too. This
effect confers extra market power on parking operators, and thus policy makers
should take it into account.
fees is maintained. In general, the optimal parking policy is mostly

dependent on local parking conditions, and thus each city should
set its parking policies based on city-specic analyses.
The discussion of non-linear pricing of parking should also
cover the trade-off between parking duration and parking fees.
Glazer and Niskanen (1992) highlight this trade-off clearly. A
higher parking fee induces drivers to park for shorter durations,
which increases parking turnover. Thus, it is possible for trafc
congestion to increase as parking fees increase simply because
more people will be using parking spaces. Glazer and Niskanen
(1992) nd that if trafc ow is suboptimally priced, lump-sum
parking fees can increase welfare while per-unit parking fees do
not. This suggests that social welfare can also be improved by
imposing curbside parking time limits. After all, one can occasionally achieve equivalent outcomes by changing quantity rather than
price. Quantity of parking (per driver) can be controlled by limiting
parking capacity or parking time. Arnott and Rowse (2013) concentrate on the latter and show that curbside parking time limits
may eliminate cruising for parking by discouraging drivers who
wish to park for longer durations. So, setting efcient parking time
limits may be effective when parking has to be underpriced. Two
extensions would be useful in the Arnott and Rowse (2013) setting
to sharpen its policy conclusions: allowing parkers to feed the
parking meter, and more importantly, allowing drivers to change
visit durations in response to policy changes.
Kobus et al. (2013) estimate the effects of parking fees on the
choice between curbside and garage parking in downtown Almere
in the Netherlands, where all parking spaces are regulated by the
city. They use data for all paid parking transactions during
shopping hours. They nd the curbside parking demand in this
city to be extremely elastic, and thus even tiny changes in curbside
parking fees may dramatically alter the stock of occupied curbside
parking spaces. This result is driven mainly by long-term parkers,
who are very sensitive to parking prices and have a large effect on
the occupancy rate. Because curbside parking spaces are on
average closer to drivers' nal destination in the area, drivers are
willing to pay a premium for curbside parking. Kobus et al. (2013)
estimate this premium to be in the range of 0.370.60 Euros.
Moreover, when the parking duration is 1 h, the price elasticity of
the share of curbside parking is about 5.5, while it is much
smaller for shorter durations. One notable feature of the Dutch
cities is that curbside parking is usually at least as expensive as
regulated garage parking. This is the opposite of many North
American cities, where garage parking is not regulated and is
considerably more expensive than curbside parking.
4. Minimum and maximum parking requirements

A large part of the literature is devoted to getting parking prices
right. It is true that parking pricing is extremely important, but
quantity issues are just as important as pricing. In Section 2, I
reviewed some papers trying to answer the question of how many
parking spaces should be supplied in downtown areas. In this
section, I review papers evaluating (minimum and maximum)
parking requirements, which determine how many parking spaces
should be supplied by each land use.
Minimum parking requirements, which exist in almost all cities
and towns, determine the minimum amount of parking that each
land use must provide. They are set because property developers
have little incentive to provide enough parking spaces to cover the
demand generated by the properties they construct if convenient
parking spaces are available nearby. After all, there are alternative
uses of the land for more shops and residences. Moreover, as
explained in Section 2, unpriced (or underpriced) parking suffers
from the tragedy of the commons, which creates an additional
ecotra.2014.11.001i
motivation for setting parking minimums to prevent spillover

parking around properties.14
There is empirical evidence that minimum parking requirements affect the amount of parking supplied on a parcel. Cutter
and Franco (2012) concentrate on Los Angeles and analyze
empirically whether minimum parking requirements are binding
for suburban land uses by using data for commercial, industrial,
and retail property sales. Their indirect test, looking at the gap
between the marginal cost of an additional square foot of parking
area and its marginal value (measured by the increase in the sales
price from an additional square foot of parking area), shows that
the minimum parking requirements bind for the majority of the
six different land-use categories they investigate. This means that
property developers would supply less parking if there were no
minimum parking requirements. They also look at the difference
between the average parking supply ratio and the estimated
required parking ratio. With this direct test, they show that
minimum parking requirements for service retail properties
strongly bind. Those for ofces and warehouses do not bind as
strongly as they do for other properties.
Although parking minimums are set to ensure that enough
parking spaces are provided by property developers, the word
enough turns out to be tricky. As Shoup (1999) points out, the
zoning and building codes determine parking capacity for each
land use so as to satisfy peak demand for free parking. When
parking is free, everyone, not just the drivers, bears the costs of
providing parking spaces, because those costs are embedded
pretty much in the prices of everything else in the city, especially
in the property prices and rents. Manville (2013) summarizes
nicely how this acts in the housing market:
When local governments require onsite parking for new housing, the cost of housing rises and the price of driving falls. The
cost of parking, which drivers should arguably pay at the end of
their trips, is instead paid by developers at the start of their
projects. The terminal cost of driving becomes an up-front cost
of property development. (Manville, 2013, p. 49).
In his back-of-the-envelope calculations, Shoup (1999) nds
that construction cost of four above-ground (below-ground) parking spaces per 1000 square feet of ofce space increases the cost of
the ofce space by 27% (67%). In a study of six neighborhoods in
San Francisco, Jia and Wachs (1999) nd that the prices of singlefamily houses and condominiums are more than 10% higher when
they include off-street parking than when they do not. Manville
(2013) estimates that there will be less housing and less variety in
housing (bundled or unbundled with parking) in response to the
zoning laws on parking. Manville et al. (2013) show that parking
requirements have strong effects on housing, vehicle, and population densities. They compare Los Angeles with New York to show
how residential minimum parking requirements decrease congestion. It turns out that, when parking requirements decrease
congestion, they do so by decreasing housing and population
density around the location, not by reducing the number of cars.
In fact, they nd that a 10% increase in residential minimum
parking requirements in New York increases vehicles per square
14
Whether increasing parking capacity in fact helps in solving the spillover
parking problem is not certain. Suppose that some of the total parking demand is
satised by subsidized (or free) parking. Merriman (1997) shows that, if the parking
demand is price elastic, total parking demand increases disproportionately more in
response to an increase in subsidized parking capacity. That is, an additional
subsidized parking space attracts more than one additional parking demand. Thus,
spillover parking around subsidized parking areas can be paradoxically higher if the
subsidized parking spaces are expanded. Lai (2006) extends this result to an
endogenous parking pricing setting.
mile by 5%, vehicles per person by 4%, and decreases housing and
population density by 6%.
There are very specic parking requirements for each land use,
including exterminators, asylums, and slaughterhouses, to name just a
few. The zoning and building codes determine them ad hoc. However,
the implicit message of many parking papers is to tailor parking
policies according to local conditions (see, e.g., Inci and Lindsey, 2014).
In fact, the SFpark experiment, reviewed in Section 6, revealed that
even the differences in adjacent blocks are very important to optimal
policy (Pierce and Shoup, 2013). Despite these facts, unfortunately,
neither theory nor data plays a signicant role in determining parking
requirements in current practice. Willson (1996) reports from his
survey with 144 planning directors that inspecting nearby cities and
consulting the handbooks of the Institute of Transportation Engineers
are the most frequently used methods in determining parking
requirements. Jakle and Sculle (2004) provide a historical review of
how these requirements spread from one city to another. No one
knows if copying a city's parking requirement will be optimal for
another city. The requirements in the handbooks are based on an
unstated assumption of free parking, because most parking was free
when they were published.
Most of the recent work on urban planning has recommended
eliminating parking requirements completely and replacing them
with a more market-based approach, in which costs and benets
become the main determinants of parking supply. Willson (2013)
provides detailed prescriptions on how to reform parking requirements. Shoup (1999, 2005b) provides convincing arguments on
why minimum parking requirements can also excessively increase
car ownership and usage. Weinberger (2012) gives some evidence.
He concentrates on private, on-site, residential parking in New
York City and shows that those who have guaranteed on-site
parking spaces at their origin have a greater propensity to use cars.
This holds even between origins and destinations that are well
connected by public transportation. Because more driving means
increased trafc congestion, Weinberger's (2012) results imply
that drivers trade off ease in parking for higher travel time and
higher oil consumption. One practical and successful implementation of reducing minimum parking requirements is California's
parking cash-out legislation from the mid-1990s (see Section 7.3).
It is unclear if we should eliminate minimum parking requirements completely or tailor them to local conditions (with the
assumption that the market alone is unable to do so). In fact, in his
review of The High Cost of Free Parking, Levinson (2005) argues that
such requirements do not appear to be problematic in low-density
suburban areas. As Barter (2010) states, even if we want to
eliminate them, we do not know if the market will be ideal after
elimination or if we will need to regulate the market further
(for example, by instating maximum parking requirements that
determine the maximum amount of parking each land use must
provide).15 The planning literature does not say much about how
the transition will happen or about what will happen to the
existing parking market during the transition. Barter (2010) offers
suggestions on how to put together parking policy in the absence
of parking requirements. He believes that, for well-functioning
parking markets, we need to actively foster and regulate them.
Guo and Ren (2013) analyze the 2004 parking reform in London
that replaced minimum parking requirements with maximum
parking requirements. They analyze garage parking in new housing properties in 22 boroughs from 2004 to 2010. They nd that
the parking supply in residential developments decreased by 40%
after the parking reform. The removal of the minimums explains
15
Arnott (2006), reviewed in Section 3, discusses the effects of imposing
minimum and maximum parking requirements on a downtown area. Hasker and
Inci (2014), reviewed in Section 7.2, provide a foundation for imposing minimum
parking requirements in shopping malls.
ecotra.2014.11.001i
97.8% of the change, while imposing maximums explains only

2.2%. Without maximum parking requirements, more parking is
supplied in the unregulated parking market in high-density areas
with abundant public transportation possibilities. An unregulated
market ignores the high social cost of driving. Thus, maximum
parking requirements appear to be an important policy tool when
in addition curbside parking is controlled. The parking reform in
London is a valuable natural experiment because it is a once-andfor-all, large-scale change. So, the results could be viewed as more
general than those from small-scale case studies.
5. Bottleneck model, road pricing, and parking pricing

A large body of literature concentrates on the optimal pricing of
roads in bottleneck models. Vickrey (1969) is the father of the
most widely used model in the literature, which was later
formalized by Arnott et al. (1990) and elaborated by a series of
other papers by the same coauthors. In these types of models,
rush-hour trafc dynamics are modeled as a queue that forms
behind a bottleneck. Despite the facts that optimal road pricing is
known to be very effective and that it has been proposed by
prominent transportation economists for many years, cities seldom use it in practice. London, Singapore, and Stockholm are the
larger cities known for their success in implementing it. Road
pricing, or congestion tolling, is not applied frequently in practice,
given the political risks and large implementation costs it involves.
A less (though still) risky, cheaper, and somewhat neglected option
is parking pricing. After all, road prices and parking fees can
substitute each other to some extent, and parking fees require
simpler and cheaper investments. Thus, a part of the literature
compares the two pricing methods from a welfare perspective.
Arnott et al. (1991) explore the effects of parking fees on
morning rush-hour trafc congestion in a deterministic bottleneck
model. They show that spatially varied parking fees can signicantly decrease travel costs in urban areas. In their model, the
workplace is at the CBD, and parking spaces are between the CBD
and the bottleneck. Commuters choose their departure time and
parking location, and they have to walk to the workplace after
parking. Their aim is to minimize the full price of a trip, which is
composed of in-transit travel time, walking time costs, schedule
delay costs, tolls, and parking fees. Parking search time is
neglected, and the parking fee is not dependent on parking
duration. When roads and parking are free, commuters park in
order of increasing distance from the CBD. As a result, schedule
delay costs are higher in the aggregate. These costs can be
minimized by competitively set parking fees, but this does not
eliminate congestion. So, the welfare gains from competitively set
parking fees alone are limited and sometimes even negative.
Arnott et al. (1991) analyze two types of optimal pricing schemes.
A time-varying toll can eliminate queuing, but drivers still park in
order of increasing distance from the CBD. However, although a
location-dependent pricing does not eliminate queuing, it reverses
the order of parking spots being taken. As a result, arrival times
come close to the work start time; hence, this pricing scheme may
be superior. Thus, the optimal parking fee system can be at least as
efcient as the optimal time-varying tolls. The social optimum can
be achieved by a jointly optimal congestion toll and locationdependent parking fee scheme.
Like Arnott et al. (1991), Qian et al. (2011) concentrate on the
morning commute in the bottleneck model, but they make
different assumptions about the parking market setting. First,
rather than continuously provided, parking spaces in their model
are in nitely many parking areas composed of parking lots. Each
parking lot in a parking area charges the same parking fee, and the
access times from any of these parking lots to the CBD are the
same. There is one central and one peripheral parking area in their
model. Second, the capacity of the parking areas and access times
are endogenously determined. Third, parking lots are privately
owned and in competition with each other (see Qian et al., 2012,
for the version of the model in which all lots are publicly owned).
Qian et al. (2011) analyze the implications of three regulation
schemes: price-ceiling regulation, capacity-oor or capacityceiling regulation, and quantity tax/subsidy regulation.
Zhang et al. (2011) analyze the effectiveness of parking permit
distribution in eliminating the external costs of parking search in
the morning commute. They compare the case in which all drivers
have reserved parking with the case in which all drivers face a
binding parking capacity constraint. They show that commuting
costs are lower in the former, since the parking space reservation
system can completely eliminate inefcient competition for parking spots. Yang et al. (2013) extend this model and allow only
some drivers to have reserved parking, and they compare this
mixed-parking supply case with the two extremes considered by
Zhang et al. (2011). They show that the mixed parking supply case
is more efcient when the total number of parking spots exceeds a
certain threshold.
Zhang et al. (2008) use the setting of Arnott et al. (1991) and
combine the morning and evening commutes to derive an overall
commuting pattern for the day. Fosgerau and de Palma (2013) also
concentrate on the overall commuting pattern in a different city
setting with parking locations at the CBD and a bottleneck on the
way. They nd that only a small share of the efciency gains from
optimal tolls can be gathered using a time-varying parking fee. At
the social optimum, the optimal parking fee divides the work trips
into two time intervals. In the rst time interval, parking is
charged at a zero rate and queuing takes place, while in the
second interval parking is charged at a time-varying rate and the
bottleneck capacity is just utilized without any queues. The time
intervals are reversed for the evening commute. In a similar
fashion to Zhang et al. (2005), Fosgerau and de Palma (2013) also
show that the parking policy can make use of the interaction
between the morning and evening commutes via the choice of
time spent at work. They show that a combined morning and
evening parking fee is more efcient than a fee only in the
morning or a fee only in the evening. In fact, the combined fee
can eliminate congestion.
Verhoef et al. (1995), too, analyze parking fees in comparison
with congestion tolls. They compare the effects of parking supply
restrictions vis-a-vis pricing instruments. They emphasize that
parking fees are only second-best policy instruments for addressing congestion because they are levied at the end of a trip and
thus cannot be differentiated with respect to trip length or roads
traveled. They nd time-varying parking fees to be superior to
parking supply restrictions for three reasons. First, an information
problem arises in supply restrictions in that drivers have to know
before making their trip decisions if there will be a parking space
available to them. Otherwise, the reduction in trips may not be
realized. Second, there is temporal inefciency in supply restrictions because they do not guarantee that the one who values a
parking spot the most gets that parking spot. Most of the time, it is
rst come, rst served. Third, there is also an intertemporal
inefciency. Early parkers do not incur the costs of search
externalities that they imposed on late parkers, which distorts
parking occupancy over the course of the day. This in turn distorts
the distribution of trafc over the course of the day. Verhoef et al.
(1995) also discuss the merits of location-dependent parking fees
in replacing road prices.
Glazer and Niskanen (1992) discuss parking pricing in the
presence and absence of road pricing. They note that parking fees
are substitutes for tolls when higher parking fees also mean higher
costs of the trip. But this does not always hold, because drivers can
ecotra.2014.11.001i
vary their parking durations or some of them may be just throughtrafc drivers who do not intend to park at all. As a result, a higher
parking fee results in lower parking durations and thereby in
higher parking turnover, which in turn increases congestion.
Calthrop et al. (2000) discuss parking policy with and without
single-ring cordon pricing using the TRENEN static urban model
calibrated for Brussels. They underline the interdependence
between parking and cordon prices. If parking prices are far below
their efcient levels, the optimal cordon price increases; and if
cordon pricing is introduced in the city, the optimally set parking
fee decreases. So, as in Arnott et al. (1991), the most efcient policy
is a combination of cordon pricing and parking pricing. They also
show how powerful the parking prices are: in their simulations,
70% of the welfare gains are gathered by imposing parking fees
even if cordon pricing is not implemented.
On the empirical side, some papers compare the performance
of road pricing with parking pricing in regulating trafc. By using
opinion surveys, Baldassare et al. (1998) nd that drivers are more
sensitive to parking pricing. Shiftan and Golani (2005) use a
stated-preference survey on higher parking costs and the introduction of congestion tolling in central Tel Aviv. In line with the
theory, the majority of workers and nonworkers stated that they
would respond to the changes by changing their travel mode, and
in the case of congestion tolling, also by rescheduling their trip
times. By using another stated-preference survey with people
linked to Technion, Albert and Mahalel (2006) nd travel demand
to be highly elastic with respect to both pricing schemes: 1.8
with respect to congestion tolls and 1.2 with respect to parking
fees. In this survey, 54% of the respondents stated that they would
prefer to use other options to avoid charges if a parking fee is
introduced, and 72% of them would do the same in response to a
congestion toll. By concentrating on a stated-preference survey in
the city of Mashhad, Azari et al. (2013) nd that drivers are more
sensitive to parking charges than to cordon tolls.
Jansson (2010) focuses on a different aspect of congestion tolls
in comparison with parking fees. He provides strong evidence that
congestion tolling has such high running costs that it might be
benecial for the city to replace congestion tolling with parking
pricing, which is usually considered to be second-best option in
mitigating trafc congestion. He offers two policy tools. One is
fringe benet taxation of employer-provided parking; the other is
a two-part-tariff kind of parking pricing scheme whose xed part
is for making the trip into the CBD and the other part is the usual
hourly parking charge. Bonsall and Young (2010) consider the
political acceptability of road user charges and offer a partial
solution. According to their proposal, the city could introduce
congestion tolling, but at the same time it would make public
parking free. Under some circumstances this scheme is shown to
increase public revenue. However, we know from the theory that a
combined policy with congestion tolling and parking pricing
should perform the best, and a priori there is no reason why free
parking would achieve the social optimum (see, e.g., Calthrop
et al., 2000).
nowadays cities are able to employ smart parking systems and

collect comprehensive data, both of which allow for more sophisticated pricing techniques. The practical implication of Vickrey's
wisdom has been defended by Shoup for a long period of time:
achieving 85% occupancy on each and every block, which mostly
means one or two empty parking spots on each street so that
cruising for parking becomes negligible.
Temporal-spatial pricing of parking is already in place in different
parts of the world. The city of Rotterdam optimizes its parking fees
street by street to achieve less cruising. In Istanbul, parking fees are
differentiated across time and space and the parking fee for the
shortest duration (i.e., the entry fee) is kept high so as to control
excess demand (just as advised in Jansson, 2010).16 One experiment in
the United States has been attracting much attention in the media. In
April 2011, San Francisco Municipal Transportation Authority launched
a plot study, called the SFpark Experiment, with a $18-million federal
grant from the US Department of Transportation. As Pierce and Shoup
(2013) put it, the idea of the experiment is to get the prices right for
a given occupancy level. That is, the parking fees are adjusted from
period to period until the right occupancy rate (i.e., the target
occupancy rate) is achieved. In this section, I review the SFpark
experiment.17 My review is mostly based on Pierce and Shoup (2013).
The SFpark experiment aims to change the parking fees block
by block until there are only one or two empty parking spots per
block. In that way, a driver is always able to nd an empty parking
spot, and thus cruising for parking is minimized. This is in line
with the theoretical nding of Arnott and Inci (2006) reviewed in
Section 2: increase the parking fee until parking becomes just
saturated. In a world of uncertainties, it is tricky to nd the right
occupancy rate. The experiment requires increasing the parking
fees on busy high-demand blocks while decreasing them on lowdemand ones. However, there are always stochastic variations in
parking demand, and thus guaranteeing one or two empty parking
spots at each block without making them underused for long
periods of time requires great sophistication. The experiment
overcomes this problem by coming up with a target occupancy
band. The parking fee on a street is decreased if the occupancy rate
is below 60% and increased if it is above 80%. Although there is
some rationale for this band, it is determined only intuitively. In a
recent paper, Arnott (2014) goes one step further to gure out the
optimal target occupancy rate in a world of stochasticities.
The experiment includes 7000 metered parking spaces on 254
blocks, 14 publicly operated parking garages, and a surface lot. The
minimum price on any block was 25 cents and the maximum price
on any block was $6. Prices are changed in response to the
occupancy rates once every 6 weeks. The price is decreased by
50 cents an hour if the occupancy rate in the previous period was
below 30%, decreased by 25 cents an hour if occupancy rate was
between 30% and 60%, kept unchanged if the occupancy rate was
between 60% and 80%, and increased by 25 cents an hour if the
occupancy rate was above 80%. There are three time blocks
(opening time to noon, noon to 3 pm, and 3 pm to closing time)
and two day times (week and weekend). Pierce and Shoup (2013)
report that there were 5294 price changes in the rst year of the
6. Toward temporal-spatial pricing of parking

In his statement to the Joint Committee on Washington
Metropolitan Problems back in the 1950s, Vickrey underlined that
parking should be priced at its social marginal cost just like any
other commodity. He argued that parking prices should be
demand responsive and thus temporally and spatially varied.
Vickrey (1954) goes through his arguments in minute detail.
Temporal-spatial parking pricing, or Vickrey parking pricing, was
difcult to implement when it was introduced, given traditional
parking meter technology and the available data. However,
16
Van Ommeren and Russo (2014) empirically show the signicance of the
gains associated with varying parking fees with respect to time. In particular, they
show that the gain from shifting from free parking to time-varying parking fees at a
hospital in the Netherlands is on the order of 10% of overall parking costs of the
hospital.
17
A comprehensive description of the SFpark experiment can be found in San
Francisco Municipal Transportation Authority (2011) and its evaluations in San
Francisco Municipal Transportation Authority (2014). The evaluations show that
average parking fees became lower; parking availability improved; parking search
and parking fee payment became easier; double parking, peak period congestion,
trafc volume, greenhouse gas emissions, and vehicle miles traveled decreased, and
trafc speed and road safety increased.
ecotra.2014.11.001i
10
experiment. Prices were increased in 32% of the cases, decreased

in 31%, and kept unchanged in 37%. As a result, the average price
fell by about 1% overall.
The beauty of the experiment is that all decisions are based on
economic criteria and data, and all changes are announced publicly. Thus, political inuence is minimized and transparency is
maximized. Moreover, revenue generation is not among the main
aims. Basically, demand determines parking fees. As argued in
detail by Pierce and Shoup (2013), in response to the price
changes, short-time parkers, carpoolers, those who have difculty
walking, and those who attach high value on saving time are
expected to park disproportionately in convenient parking spots,
while long-term parkers, solo drivers, those who love walking, and
those who attach low value on saving time are expected to move
toward distant parking spaces. Pierce and Shoup (2013) calculate
the simple mid-point price elasticity of occupancy rates. Although
they do not control for the endogeneity of the price changes,18
their estimates show how elasticities vary by time and location,
which highlights once again why the city should move toward
temporal-spatial parking pricing.
The SFpark experiment shows us that by ne-tuning parking
fees, cities can let drivers save time via reduced trafc congestion.
Seeing this potential, other cities have also started similar experiments. The LA ExpressPark is one of them. Milan and Mexico City
have been considering similar experiments. One dimension that
should be added to these experiments is the ability to predict.
These experiments are reactive in that they adjust prices after
demand realizations and continue to iterate (and reiterate) from
there until the target is achieved. This is costly. After all, if a price
of a good is changed too frequently, there will be menu costs,
frustration among customers, and the experiment may not achieve
its desired result simply because people cannot follow the current
prices and react optimally to them. A less costly way of designing
parking policy is to turn to demand-prediction methods based on
theoretical models, microsimulations, and empirical estimations.
In that way, at least the number of iterations can be lessened.
Millard-Ball et al. (2014b) move toward this direction by
offering simulations based on the SFpark data. They evaluate the
rst two years of the experiment and nd that the program slowly
achieved the 6080% average occupancy rate goal and diminished
cruising for parking by 50%. Although the short-term impact of any
single price adjustment appears to be small, the long-term impact
of a series of small adjustments on occupancy and cruising is
signicant. Chatman and Manville (2014) also evaluate the rst
two years of the SFpark experiment. They show that despite the
fact that the price increases lowered the block-level parking
occupancy as intended, parking availability (dened to be the
share of time at least one space on the block face is vacant)
improved only very modestly. This is because a block can be
entirely full for many hours even though the monthly average
parking occupancy falls in the 6080% interval.
Another performance-based parking pricing scheme was
implemented by the city of Seattle in the rst four months of
2011. The target occupancy rate was chosen to be 7186% in this
experiment. Ottosson et al. (2013) provide the main ndings of the
experiment. They obtain price elasticity of parking demand by
time of the day and neighborhood characteristics. Again, in line
with Vickrey's vision, elasticities change with time and space. They
18
By employing a regression discontinuity analysis, Millard-Ball et al. (2014a)
nd much lower (short-run) price elasticities than those calculated by Pierce and
Shoup (2013). They argue that there is an endogeneity problem in Pierce and
Shoup's (2013) mid-point elasticity calculations since even random uctuations in
demand could trigger price changes under the price-adjustment rule used by the
SFpark experiment. In fact, they nd that the impact of parking fee adjustments on
drivers' behavior is statistically insignicant in the short run.
also analyze the effects of parking fee changes on parking duration, parking turnover, and total revenue. As in the SFpark experiment, short-run parking demand is found to be inelastic, but with
persistent implementation, a signicant change in variables of
interest occurred in the long run. In particular, drivers ended up
parking for a shorter time on those blocks where prices increased
and for a longer time on those blocks where prices decreased.19
7. Various forms of parking

Various forms of parking have attracted particular interest in the
literature. In this section, three specic parking forms are reviewed.
Section 7.1 reviews the work on residential parking, Section 7.2 the
work on shopping mall parking, and nally Section 7.3 the work on
employer-provided parking.
7.1. Residential parking
Residential parking is usually provided curbside to address
spillover parking around shopping malls, ofce buildings, stadiums, etc., for the benet of residents living nearby. In most
countries, residents have to pay for residential parking rights (or
parking permits). Residential parking also includes on-site garage
parking available in residential properties, whose supply is usually
determined by parking zoning regulations (reviewed in Section 4).
Residential parking may also include driveway parking.
The only existing theoretical work on residential parking to
date is that by Molenda and Sieg (2013). They analyze the trade-off
between the convenience of living close to the amenities of the
city and the difculty of nding a parking space in central areas.
They determine when it is desirable to allocate residential curbside parking from both the resident's and the social planner's
perspective.
Using a household survey in New York City, Guo (2013a, 2013b)
nds that availability of residential parking has a large effect on car
ownership. Usually, the cost of residential parking is embedded in
housing costs. Making use of house prices in Amsterdam, van
Ommeren et al. (2011) estimate residents' daily willingness to pay
for parking permits to be about 10 Euros. They argue that this
amount is higher than what residents actually pay for parking
permits but lower than what nonresidents pay for parking there.
Thus, parking permits are an inefcient use of curbside parking
spaces. In a similar vein, van Ommeren et al. (2014) concentrate on
the relationship between parking supply and residential
parking permits. They estimate that parking permits impose about
275 Euros welfare loss per permit.
7.2. Shopping mall parking
Shopping malls allocate enormous amounts of land for parking,
and most of them provide parking for free. According to a survey
of the International Council of Shopping Centers and the Urban
Land Institute (2003), 94% of the malls in the US provide parking
for free, and they allocate 46 parking spaces per 1000 square feet
of gross leasable area. This translates into an amount of land larger
than the amount they allocate for shops. It is not just that land is
expensive; allocating more space for parking on that land has the
high opportunity cost of making it unavailable for shops.
Hasker and Inci (2014) provide a rationale for these observations in shopping mall parking. Their explanation is based on
customer search. Suppose for simplicity that the mall sells one
good, and consider a risk-averse customer. When the customer
19
Similar ideas are entertained in the usage-sensitive road pricing literature.
ecotra.2014.11.001i
visits the mall, there are two possible outcomes. He may nd out
that the good is his ideal good,20 in which case he buys it and
leaves the mall happily. If he came by car and if the parking fee is
positive, he pays the parking fee. Alternatively, he may nd out
that the good is not his ideal good, in which case he leaves the mall
empty-handed. Nevertheless, he still has to pay for parking. Thus,
having a positive parking fee at the mall is no different from
punishing the customer for searching for the good at the mall. This
is the last thing that a mall would like to do, and thus it provides
parking for free. Hasker and Inci (2014) show that this argument
holds whether the mall has monopoly power or prices competitively; it holds if there is a trade-off between shopping and
parking spaces. They also show that a parking validation program
does not change the result. Although the mall in their model sells a
single good, their argument can be generalized to the case in
which the mall sells many goods.
The fact that parking is free does not mean that there is no cost
of parking for the customer. In fact, the mall embeds the parking
costs in the prices of the goods it sells. Thus, a welfare analysis of a
free parking provision at the mall is vital. Hasker and Inci (2014)
show that the free provision of parking is also the second-best
social optimum. That is, a benevolent social planner would also
implement free parking at the mall. According to the International
Council of Shopping Centers and the Urban Land Institute (2003),
when the parking fee is positive, it is mostly so in urban malls,
where the parker is not necessarily a customer. Hasker and Inci
(2014) show that, if a sufcient number of parkers park at the mall
lot because they have other errands to run than shopping at the
mall, the mall starts charging them since it is the only way of
making a prot out of them.
Hasker and Inci (2014) nd that the socially optimal lot size is
always larger than the lot size chosen by a prot-maximizing mall,
because the planner cares about the welfare of those who visit the
mall but are unable to nd their ideal good. This provides a
rationale for applying minimum parking requirements at shopping
malls. However, they obtain this result when there is no trade-off
between parking lot size and shop area, which is more of an issue
for urban malls. In an extension of their model, they show that
minimum parking requirements might be replaced by maximum
parking requirements when this trade-off is sufciently important.
In fact, in addition to minimum parking requirements, a few cities
impose maximum parking requirements for all residential properties. However, the cap is so high that they almost never bind.
In an early paper, Sutherland (1959) discusses parking problems in shopping malls. More recent papers concentrate on
parking around shopping areas. For example, Lindsey and West
(1997) analyze the use of parking coupons by downtown retailers,
and Lindsey and West (1998) empirically evaluate the performance of such a price discrimination program in Edmonton,
Canada. Lan and Kanafani (1993) concentrate on a similar program, a park-and-shop program, in a non-spatial model with
exogenous prices. The attractiveness of the downtown as a
shopping place is also a concern in determining parking fees.
Rietveld et al. (2002) undertake an evaluation of 30 municipalities
in the Netherlands and nd no signicant effect of pricing and
capacity measures on shopping behavior. Bacon (1993) analyzes
the effects of changes in the parking capacity on travel for
shopping and nds that an enlarged parking capacity disproportionately increases trafc congestion downtown. Mingardo and
van Meerkerk (2012) test this hypothesis by concentrating on 80
shopping areas in the Netherlands. They nd that higher parking
20
For example, he may be looking for a particular brand of an LCD TV, and he
saw a partial description of it in advertisements. Upon seeing it in the mall, he may
feel that this is what he is looking for.
11
fees increase parking turnover but that parking turnover is

unrelated to parking capacity for all shopping areas, excluding
the regional ones.
7.3. Employer-provided parking

Firms tend to provide parking for their employers, and oftentimes for free. Small and Verhoef (2007) note that commuters pay
at most 2.5% of their parking costs at the workplace. The work on
employer-provided parking usually looks at the effects of employers' parking supply on employees' mode of travel. Willson and
Shoup (1990) nd that solo-driven trips are cut on average by 41%
in response to eliminating free parking at the workplace, which is
argued to have positive effects on congestion and air pollution.
Willson (1992) nds that auto travel to work decreases by 2534%
if employees have to pay for parking.
Van Ommeren and Wentink (2012) estimate the welfare loss
caused by free employer-provided parking. Free employerprovided parking is not taxed as a benet in kind. Hence, in a
sufciently competitive labor market, employers tend to provide
free parking rather than paying higher wages. Moreover, many
cities impose minimum parking requirements. If not chosen
wisely, these requirements make parking a xed cost, which then
results in underpriced parking. Both of these result in deadweight
loss. Van Ommeren and Wentink (2012) estimate that the tax
policy causes a welfare loss on the order of 10% of the resource cost
of the employer-provided parking spaces, while minimum parking
requirements for employers create an additional welfare loss on
the order of 18% of the resource cost of the employer-provided
parking spaces.
Parking cash out policies have been offered as a powerful
method of regulating downtown parking demand. Under such a
policy scheme, employers are required to offer employees the
option to take the cash amount of the employer-provided parking
spaces. This approach had in fact been in the air since Roth (1965)
and extends up until Shoup (1995, 1997, 1999, 2005a, 2005b).
Shoup (1997, 2005a) carried out extensive work on the parking
cash-out policy in California, which applied only to employers who
rented spaces from a third party. He nds that solo drivers
decreased from 76% to 63%, carpoolers increased from 14% to
23%, public transportation users increased from 6% to 9%, number
of workers walking increased from 2% to 3%, and number of
bicyclists increased from 0.8% to 0.9%.
Ison and Wall (2002) and Rye and Ison (2005) look at the UK
experience in implementing workplace parking charges. They
emphasize how to overcome the pitfalls in practical implementation. Watters et al. (2006) look at behavioral reactions to imposing
work place parking charges by various age and income segments
in Dublin. They nd that 22.3% of individuals would continue to
commute to work by car if a 5-Euro charge is imposed per day for
parking at the workplace. By administering some questionnaires
and focus groups with employees, Aldridge et al. (2006) explore
the possibility of introducing paid-employee parking at airports.21
In sum, whether to have employer-provided parking depends
crucially on the level of road congestion. However, in busy downtown areas, it should be seen as a form of underpricing of parking
and thus should be limited.
21
Another special parking form is university campus parking, where not just
the employees (staff and academics) but also students and other university
community members can use the parking spaces. Barata et al. (2011) concentrate
on parking problems at the University of Coimbra in Portugal and nd that 45% of
the parking spaces are subject to no parking regulations, thus parking is seriously
underpriced. Tezcan (2012) tries to identify what happens if paid parking is
introduced at the Ayazaga Campus of Istanbul Technical University.
ecotra.2014.11.001i
12
8. Directions for future research

Parking policy has traditionally been supply oriented. With
recent work, the emphasis has shifted to a more market-oriented,
demand-focused approach. Although exceptions exist, for most
forms of parking, cashing out free or subsidized parking and
eliminating cruising for parking as much as possible are the most
important messages of the literature. The topics covered in this
review paper are topics that have been studied extensively. I nish
this review by identifying (some of) the understudied topics that
may require further elaboration for improvements to parking
policy.
The performance of any parking policy (or, as a matter of fact,
any policy) depends crucially on the level of enforcement.
Kladeftiras and Antoniou (2013) use microsimulations to analyze
the effects of illegal parking on trafc congestion and show that
average trafc speed can be increased by at least 1015% by
limiting double parking, and that it can be increased by up to
44% by completely eliminating double parking. They also show
that even higher rates of improvements can be obtained in delays
and stopped time. However, most parking papers, with the
exception of Elliott and Wright (1982), Cullinane (1993),
Thomson and Richardson (1998), and Petiot (2004), assume
perfect enforcement. There is thus an immediate need for theoretical, empirical, or case-study-based analyses of illegal/informal
parking and parking enforcement.
Another urgent need in the literature is further elaboration on
the political economy of parking. Russo (2013) provides an
evaluation of political concerns in determining road charges and
parking prices at both the regional and city level. Button (2006)
touches on some political economy concerns in parking. Marsden
(2006) tries to determine the evidence base for parking restraints
in practice. Many papers underline the inuence of lobbying by
merchants on free parking in downtown areas in order not to lose
their competitive advantage to suburban malls, which mostly
provide free parking. Other papers highlight that an effective
way to increase the acceptability of higher parking fees is to use
the parking revenue to improve the public space around the
streets whose parking fees are increased while making these
improvements as explicit as possible. However, structural examinations of the role of politics in the determination of parking
prices and quantities require further work. A nice piece toward
that direction is provided by Rye et al. (2008). They consider the
parking policy changes in Edinburgh partly in response to public
and business opinion surveys in the city and compare them with
parking policies that would be based solely on travel trends. In
that sense, they demonstrate the inuence of the political process
on parking policy formulation.
For better policy making, cities need to better understand the
interaction between parked cars and cars in transit. The studies on
cruising for parking partially contribute to this by analyzing the
effects of cruising cars on the travel time of all cars. But, another
such interaction the relationship between parking and mode
choice is somewhat understudied, especially theoretically. Gillen
(1977) provides an early empirical assessment of the effects of
parking costs on mode choice and nds parking fee elasticities to
be low, since higher parking fees trigger not only modal shift but
also parking relocation. Sabir et al. (2013) recommend coordinating mode choice by appropriate pricing of parking at the beach.
Merriman (1998) estimates that increasing parking capacity by
one unit at parking-capacity-restrained rail stations in Chicago
increases the number of passengers boarding by between 0.3 and
2.2. Voith (1998) looks at the effects of parking taxes (and public
transportation subsidies) on community size, land value, and
mode choice in a general equilibrium setting. He nds that parking
fees have non-monotonic effects on these interest variables. To set
the baseline for parking policy formation, empirical work should

focus on obtaining relevant sensitivities for as many locations and
times of interest as possible.
Perhaps the most important and practical input for parking
policy formation is parking demand elasticity. Many studies
concentrate on estimating this variable. The price elasticity of
parking demand is found to vary across time, space, and groups of
people.22 However, given the current state of administrative data,
in estimating elasticities, many existing papers neglect cruising for
parking, which creates latent demand. The literature should focus
on incorporating parking search into estimation procedures in
order to measure cruising-for-parking time costs more precisely,
which can then be used to estimate elasticities based on generalized prices of trips (see Madsen et al., 2013, for an attempt in that
direction). Because many interest variables in parking are specic
to time, location, and groups of people, I should also emphasize
again the importance of microsimulations on real road networks.
For that matter, engineers, who develop trafc simulation models,
and economists, who specialize on price and quantity determination, should interact more to improve the existing models and
develop better ones. Last but not least, we need bridge studies to
translate scientic insights into detailed policy prescriptions that
cities can realistically implement.
Acknowledgments
I would like to acknowledge nancial support from the Scientic
and Technological Research Council of Turkey (TUBITAK Career Grant
111K051) and the Turkish Academy of Sciences (Outstanding Young
Scientist Award TUBA-GEBIP), and the recognition by the Science
Academy (Turkey) via their Young Scientist Award (BAGEP). I would
like to thank Ken Small and participants at the TIDE Training and
Exchange Workshop in Milan (2014) and Excellence in Science: ERC
Enables Young Researchers Symposium (jointly organized by the
ERC, TUBA, and TUBITAK) for very helpful comments and Guner
Velioglu and Ozde Ozkaya for excellent research assistance. All errors
are my responsibility.
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Contents lists available at ScienceDirect

A review of the economics of parking

Tel.: 90 216 483 9340; fax: 90 216 483 9250.

treated parking only as a cost added on at the end of a trip, which, as

E. Inci / Economics of Transportation ()

related to the quantity and price of parking. Various distortions in

2. Cruising for parking

activity involves at least some time costs. Search time is an

In-transit travel time per mile, t in other words the congestion

E. Inci / Economics of Transportation ()

that a car cruising for parking contributes to trafc congestion at least

Substituting for tT; C; P and F yields two equations in T and C:

the y-axis. As explained in detail by Arnott and Inci (2010), just as

Fig. 1. Demand and supply analysis when there is curbside parking.

E. Inci / Economics of Transportation ()

User Cost + Optimal Parking Fee

User Cost + Parking Fee

restriction policy, according to which one can park for free up to a

further by allowing trip demand to be elastic. Their extension

E. Inci / Economics of Transportation ()

heterogeneities become very important for occupancy levels above

3. Spatial competition in the parking sector

exceptions exist, parking fees are generally concave in parking

E. Inci / Economics of Transportation ()

fees is maintained. In general, the optimal parking policy is mostly

4. Minimum and maximum parking requirements

E. Inci / Economics of Transportation ()

motivation for setting parking minimums to prevent spillover

E. Inci / Economics of Transportation ()

97.8% of the change, while imposing maximums explains only

5. Bottleneck model, road pricing, and parking pricing

E. Inci / Economics of Transportation ()

nowadays cities are able to employ smart parking systems and

6. Toward temporal-spatial pricing of parking

E. Inci / Economics of Transportation ()

experiment. Prices were increased in 32% of the cases, decreased

7. Various forms of parking

Similar ideas are entertained in the usage-sensitive road pricing literature.

E. Inci / Economics of Transportation ()

fees increase parking turnover but that parking turnover is

7.3. Employer-provided parking

E. Inci / Economics of Transportation ()

8. Directions for future research

the baseline for parking policy formation, empirical work should

E. Inci / Economics of Transportation ()

E. Inci / Economics of Transportation ()

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