Thursday, January 27, 2005

Parking Work Perks

Months ago, I claimed that I planned to write something about workplace parking policies. A characteristically funny post by Tom Smith, over at The Right Coast, reminded me to follow through. Here’s the problem: How best to allocate scarce parking spaces to employees?

Smith hints at his law school's policy for professors by noting that they can rent reserved spaces right next to the law school for well over a hundred bucks a year. Because I visited at the University of San Diego School of Law in 2000-01, I know the other half of the deal: You can in the alternative pay a good deal less for the right only to hunt for an open slot in a lot much farther away.

USD's parking policy offers at least a modicum of choice, and shows the school engaged in some commendable price discrimination. Still, though, the sight of many unused slots right next to the law school, combined with the generally tight parking situation at USD, suggested to me that its policy wasted scarce parking resources.

At Chapman, parking policies have fluctuated. We began this year with a sort of two-tier policy wherein at least some employees had a choice between paying $150 (if memory serves) for the right to park anywhere in the parking structure near school or $50 for the right to park a couple of blocks away. I choose the latter option and used my skateboard to shorten my sub-commute. But the University apparently misjudged the demand curve for parking, and discovered that its new and expensive parking structure was being sorely underutilized. Too many other employees joined me in taking the cheapskate option (though I think I was the only cheap skateboarder). This semester, the school responded by fiddling around with the policy's "who," "where," and "how many $s" parameters, apparently improving the allocation of resources though not fundamentally changing its parking management tools.

What do those examples and, um, parking theory suggest? Two things: Reserved slots risk waste and central authorities do not excel at setting parking prices.

The first observation might surprise a fan of markets, who would probably assume that establishing property rights in parking spots would optimize social utility. Property rights generally support that outcome, after all. Coordination problems make it difficult, however, for those who rent unused parking spaces to sublease them. It's not impossible of course; I effectively did it with d, who teaches at USD, when I was visiting there. But we were able to work things out over the dinner table. Few other employees can find a parking partner so easily.

Note that I said only that reserved spaces risk waste. An employer could perhaps mitigate the transaction costs responsible for that waste by setting up a secondary market in parking rights. One person would rent a space and then, on the parking market, arrange to sub-lease it at select times. For that matter, of course, any entrepreneur could set up such a market, assuming he or she could wring some profit out of parking arbitrage. But in either case, I suspect that the game is not worth the candle. Even in SoCal, parking probably is not that important.

What about curing the ignorance of university administrators who misjudge parking prices? To me, at least, an auction offers the obvious answer. I've even suggested as much in debates at my school about how to reform parking. But nobody else seems to like the idea. I suspect that they balk for a non-economic reason: They cannot abide the thought of better paid B-School and Law School professors snapping up the best slots in the parking structure, leaving the undergrad liberal arts profs to schlep to and from relatively distant lots.

I won't disparage that critique as ridiculous because I can easily I understand why making salary differentials too visible might hurt morale. Still, though, I can easily imagine a cure that would both employ market processes and preserve social harmony: Have employees bid for parking spaces not in raw dollars but rather in percentages of pay. An English professor earning $50,000/year could thus go head-to-head in the parking auction by bidding $50 (.1% of her income) against a law professor who earns twice as much and bids $100 (.1% of his income).

In sum, if an employer were to set up a market for the right to park in a particular lot (rather than space) and handicap bidding to reflect salary differentials, I think that it would end up with a pretty fair and efficient solution to the problem of parking work perks.


Stephen said...

What you really need in that situation is something akin to the private freeway that changes prices based on the current consumption of the freeway resources (where it costs more to enter an already congested freeway).

For instance:

Each spot has a meter. Each meter is interconnected to a mesh system. The price to park is determined by the current value of the spot.

This takes care of a variety of issues. First, it takes the guesswork (mostly) out of the pricing as it can be adjusted in near real-time.

Second, it sets the "fair" price for the spot.

It also supplies some hidden advantages. One such saving would be time. If there are X cars, the price for spot X+1 should be roughly the same as spot N. This would mean that the each person would park only as far away as needed. This would reduce the total sub-commute time.

Such a system would (again more or less) encourage parkers to fill the spots in a systematic way. This would reduce the time spent hunting for a spot.

The system would be somewhat chaotic at first. However, with enough data, the value of every spot at every time would be quickly discovered. From then it would simply be a matter of tweaking…

Anonymous said...

What subject does your wife teach?


Tom W. Bell said...

Stephan: I like your proposal in theory, but wouldn't the upfront capital outlay and continuing upkeep expenses prove prohibitive?

SK: She runs USD Law School's Entrepreneurship Clinic.

Stephen said...

Silly me -- I was under the impression that all questions regarding economics start with the phrase "assume that...."

It's like the old joke --

"An economist, a physicist, and a psychic find a can of food while they are stranded on a desert island. The physicist says that they should use their eyeglasses to focus the sun on the can to burn a hole in it. The psychic argues that they should focus their mental energy on the can to pry it open. The economist shakes his head and says, “Why don’t we just assume that we have a can opener?”"

In all seriousness -- yes, there are practical problems. However, with nearly all tech-based solutions you assume that the cost of the cogs will come down to eventually meet your needs. ;)


Tom W. Bell said...

Stephan: I like your proposal in theory, but wouldn't the upfront capital outlay and continuing upkeep expenses prove prohibitive?

SK: She runs USD Law School's Entrepreneurship Clinic.

Anonymous said...

$50 bucks to park a couple of blocks away! Man, I wish. I'm living an example of profit maximization under a monopoly. Where I work (at a University) I have the priviledge of paying over $200 per year to park 'catch as catch can.' I'd park off campus but the nearest free parking is over a mile away, across a major roadway that is not pedestrian friendly, and not really public parking. In a bid to provide an appearence of 'fairness' the parking fee is based on salary, but it's regressive, as I pay a higher portion of my salary to park than say, the dean.

Oddly, every for profit company I've worked for has provided free, and in a couple of cases, protected, parking. Why is it that Universities see parking as a priviledge instead of a cost of doing business?

Enjoying your posts,