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Would market price car parking work in Canberra?

By Sol - 21 May 2015 19

car-parking-dickson

Yesterday I was walking through Commonwealth Park and I noticed that the nearby carpark, which was always full before pay parking was introduced, was almost completely empty.

There were two cars in the carpark, both paying the daily rate of $12 (I think). This means that the government’s return after spending thousands of dollars on installing pay parking machines in that carpark is just $24 per day.

I was reminded of what I learned about supply and demand in Econ1001. If you set the price just right, you can fill every space and make the maximum amount of money, whilst making sure customers are happy to pay the amount being charged.

I thought further about the idea and came up with something I’d like to share: a carpark that adjusts its pricing to the market on a daily basis. Here’s how it would work:

Thought Experiment – Market Price Parking

Imagine a carpark in the center of the city, say the London Circuit carpark next to the Melbourne Building. The ACT Government installs a radical new system of parking lot pricing to optimise revenue and ensure effective use of available parking space. A digital sign is installed at the entrance to the parking lot (kind of like a petrol station price sign). The sign displays the daily parking price and the number of spaces currently available.

The first day the car park is ‘opened’, the price is set to $5. Obviously, this is very low. Parking will be in high demand at this price and it is highly likely that the carpark will fill up completely. The parking machines and boom gates collect statistics (It’s important to know how fast the carpark fills up).

On day two, after an algorithm or economist has reviewed the data from the first day, it may be decided that since the carpark filled up so fast at such a low price, the price will be increased to $8. It is now much cheaper to catch a bus than to drive, and there are cheaper or free carparks further away that some people who parked here on day one are willing to walk from. Still, $8 is cheap for all day city parking, so the carpark fills up completely, just not as quickly as the day before.

Over the next few days the price rises steadily, $10 the third day (now you can park for the same price at the Canberra Centre, for example, so a few customers are lost), then $11, and it settles around $11-13, depending on the day of the week etc. The price settles around here because other carparks in the city are priced about this much.

If the parking algorithm/economist has done it/their job correctly, there should be exactly one free space available in the carpark once everyone who is willing to park there has arrived . This level of patronage corresponds to the maximum revenue possible for this carpark, based on the competitor pricing. If you raise the price, more parks will be empty, if you lower the price, the carpark will remain full and you’ll just make less money.

One would expect over the next months that the pricing of this carpark would vary only with changes in parking/transport costs of other fixed services.

Now imagine two other scenarios that build on this idea:

  • Remember the carpark I talked about at the beginning of this article. $12/day, two cars, maybe a 15 minute walk from most places in the city. I would be willing to walk that far to get to walk, but not if I could park closer for the same price. Let’s install this system there too! Suddenly, parking is $2 a day and the carpark fills up completely. Instead of making $24, the government is making $400. After a few days the price settles around $5-6 a day, bringing the daily revenue of the carpark up to around $1000 (I’m assuming it has about 200 spaces) and making people like me happy with cheaper parking.
  • Extend this idea to all the carparks in the city. It’s very hard to predict what would happen with the pricing if there were no fixed prices to set the market up. You can at least imagine that places like the Canberra Centre that might not have this system would have some influence over market pricing. The the most desirable carparks, the closest to the city, would have high prices. It could be more than it is now, (or would the memory of the previous fixed prices play some role in determining a ~$12 price?) and as you moved out from the city, pricing would get cheaper.

Points of further discussion:

  • Obviously, this maximises revenue, but it it good for citizens? (Are artificially low prices better?)
  • Are there any improvements or modifications to this idea that would make it work perfectly?
  • If this plan were to be rolled out across all city parking lots (it would work most effectively this way) would you support it? Why? Why not?
  • What about a variable price based on time of entry?
  • Could this encourage public transport usage? Would a similar system for public transport work as well?

What’s Your opinion?


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19 Responses to
Would market price car parking work in Canberra?
Maya123 12:17 pm 22 May 15

rubaiyat said :

Rollersk8r said :

PS. They already have lowered the price of bus fares for very early in the morning.

I hope you are not in charge of major financial matters, if that is a significance. But you never know in this town!

If you are concerned about saving money, the huge difference between driving and parking, and taking public transport makes the minor savings of off peak public transport absolutely trivial.

There is nothing rational about what people choose. We have a bus stop practically outside our door, when my wife and I both worked in the City, I caught the bus because I could, and because I could get work done on route. My wife wouldn’t take the bus full stop. She’d make up all sorts of excuses, none of which made sense. No discussion, just some inexpressible fear or aversion, or that someone she knows might see her or “something”.

She should have stuck with our neighbour’s repost, when I mentioned the convenience of having direct public transport at our doorstep. At a single word and a sharp glance she made it clear that she NEVER takes public transport! Unthinkable! How dare I suggest that she ever would.

Not sure I am forgiven yet, or whether I am branded for life.

“At a single word and a sharp glance she made it clear that she NEVER takes public transport! Unthinkable! How dare I suggest that she ever would.”
Ha, ha, reminds me of a neighbour I had. Every day she would drive to work, when there was a direct bus there. One day I said to her how convenient it was having a direct bus between us and there and only 15 minutes travel. She looked at me strangely and stated, “I NEVER catch buses.” My estimation of her plummeted after that.
I think there is a percentage of people who make all sorts of excuses why they don’t use buses, but basically it stems from that attitude.

bronal 10:18 am 22 May 15

A new multistorey $9.50 a day car park has recently opened in Woden, opposite the Sirius Building and Aviation House. Even though the car parks opposite the Albemarle/Alexander Buildings were immediately closed, it’s interesting to note that there now appears to be an over-supply of parking in Woden, as the top level of the new car park is barely occupied and there are now spaces all day in the $8 parks next to the old CIT. People are obviously prepared to pay an extra $1.50 for a few hundred metres less to walk.

ChrisinTurner 9:07 am 22 May 15

One of the intentions was to lower road congestion and stop rat-running by getting more people onto public transport. This is working as evidenced by empty car-parks. Congratulations to everyone concerned.

wildturkeycanoe 6:39 am 22 May 15

How would the algorithm take into account things like flexi days for instance with a whole heap of extra spaces on a Friday?
I for one would hate to see the price change regularly and not be able to budget for parking a week in advance.
Why not do the same for public transport too? If the buses are empty, make the fare cheaper. If they are crowded, charge a bit more.
If people are using more electricity why not lower the price and charge extra when it is in high demand. Oh, they already do that don’t they. Well, it seems like the concept has already been adopted in some industries, so why not. If it is a win for drivers then I say go for it. Do the same for the ridiculous multistory parks at the Canberra Center too, it is way overpriced in my opinion.

One question though, would this proposal not start up a price war and competition between the private owners and the government for parking revenue? Are there safeguards in place presently that prevent that from happening?

Dondon 8:44 pm 21 May 15

Well considering the last couple of days the Canberra Times has been reporting about the huge windfall and how quickly the paid parking in the triangle turned a profit I think your argument is flawed.

As someone who works in the area the car parks are still pretty full by 9AM. In fact on Wednesday the parking near Finance was full.

rubaiyat 7:03 pm 21 May 15

Rollersk8r said :

PS. They already have lowered the price of bus fares for very early in the morning.

I hope you are not in charge of major financial matters, if that is a significance. But you never know in this town!

If you are concerned about saving money, the huge difference between driving and parking, and taking public transport makes the minor savings of off peak public transport absolutely trivial.

There is nothing rational about what people choose. We have a bus stop practically outside our door, when my wife and I both worked in the City, I caught the bus because I could, and because I could get work done on route. My wife wouldn’t take the bus full stop. She’d make up all sorts of excuses, none of which made sense. No discussion, just some inexpressible fear or aversion, or that someone she knows might see her or “something”.

She should have stuck with our neighbour’s repost, when I mentioned the convenience of having direct public transport at our doorstep. At a single word and a sharp glance she made it clear that she NEVER takes public transport! Unthinkable! How dare I suggest that she ever would.

Not sure I am forgiven yet, or whether I am branded for life.

vintage123 3:35 pm 21 May 15

Whilst sound in academic nature, the results would only be an increase in the base rate once it was concluded that drivers were happy to pay more to park, irrespective of patronage. I think we should be pretty happy that the cost of parking is so cheap here compared to places like melbourne and Sydney, considering we have a higher incomes. Last week I paid 50 dollars an hour for sydney cbd parking.

qbninthecity 2:48 pm 21 May 15

It would be great to have signage saying how many spaces are left in any given carpark, rather than having to drive through each and every one and end up running late for work or a meeting…..very frustrating

dks00k 12:30 pm 21 May 15

Be gone.

Your logic has no place here 🙂

Maya123 12:14 pm 21 May 15

VYBerlinaV8_is_back said :

I thought pricing was deliberately set to discourage people from driving?

That is my understanding too.

switch 12:08 pm 21 May 15

dlenihan said :

“Yesterday I was walking through Commonwealth Park and I noticed that the nearby carpark, which was always full before pay parking was introduced, was almost completely empty.”

Would that not mean 100s of cars not on the roads adding to congestion and pollution?

No, it just means they found somewhere else to park. I haven’t seen any decrease in the number of cars on the roads.

dlenihan 11:54 am 21 May 15

“Yesterday I was walking through Commonwealth Park and I noticed that the nearby carpark, which was always full before pay parking was introduced, was almost completely empty.”

Would that not mean 100s of cars not on the roads adding to congestion and pollution?
More bums on seats making public transport less of a cost burden.

Paid parking is not solely revenue raising (even though it does) it has significant benefits as well.

Rollersk8r 11:06 am 21 May 15

It’s definitely worth considering, but I see way too many problems, including:

1. Hard to coordinate between government and non-gov car parks. Most in Civic are private, I think?
2. You’d be extremely annoyed if today’s $6 park was suddenly $12 tomorrow.
3. Once you are in the car then the price is irrelevant – you are driving and parking regardless. Whole new layer of complexity to be able to check the anticipated price before you leave home.
4. Further, many people (myself included) have a specific need to drive and park on certain days. Price largely doesn’t bother me.
5. It may have the reverse effect of actually encouraging more people to drive (when it’s cheaper).

PS. They already have lowered the price of bus fares for very early in the morning.

VYBerlinaV8_is_back 11:01 am 21 May 15

I thought pricing was deliberately set to discourage people from driving?

arescarti42 9:26 am 21 May 15

What you’ve described actually exists – San Francisco has a system that adjusts parking prices in real time based on sensors that detect the level of car park occupancy.

Canberra probably doesn’t need anything that complex or precise, prices just need to be lowered enough to bring up the occupancy rate.

I’ve noticed as well that the Anzac Park East car park is close to empty most days, whereas it’d be close to full prior to the introduction of paid parking.

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