The Hindu Business Line : Parking problem

The other day, we were driving to a park in downtown Vancouver. Being a long weekend, the park was crowded as was the parking lot. It is not as if parking is free in the downtown area. On some days, the parking fees can be as high as $30 per day. Yet, parking space is never available. How does parking space affect our economic life?

Compensating for lost revenue

Take a shopping mall. It is necessary for the mall to allocate ample parking space for visitors. This space could have been used for other purposes — more shops for instance. Suppose the mall can build 1,000 shops but instead has only 750 shops because it has to allocate parking space. This results in lost revenue from 250 shops. The mall would obviously charge higher rent per square feet from shops to compensate for the lost revenue. The shops add that cost to the consumers. So, even if you do not use a car, you end up paying for the parking space when you buy goods at the mall!

Parking space has been debated so much that Professor Donald Shoup at the University of California has written a book "The High Cost of Free Parking".

Hiking parking fees

What is the solution for the parking problem? Economics shows us that if parking fees are hiked, the demand for parking space will reduce. Hiking parking fees has some advantages. For one, more people will car-pool or use the public transport. This will avoid congestion on the roads and reduce travelling time. For another, the local government can generate revenue.

The next time you drive to a mall or go to the busy part of your city, be sure to remember the economics behind your transport decision.

(The author is based in Surrey, BC, Canada.)

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