Uniform Price Auctions

How to Price Parking Permits

Auctioneer, central Ohio. Ben Shahn/FSA, 1938.

A few years ago, Donald Shoup had a look at the Beacon Hill neighborhood in Boston and found that there were 983 on-street parking spaces. Only residents with city-issued parking permits could park in these spots. Shoup looked a little further and found that there were 3,933 permits in force. That's roughly four permits for every spot. (See Donald Shoup, The High Cost of Free Parking, 2011 edition, p. 516 and footnotes 31 and 32 on p. 552.)

As Shoup points out in his more recent Parking and the City, "A district with more on-street parking permits than on-street parking spaces would be like a theater that sells more tickets than it has seats."
(Donald Shoup, ed., Parking and the City, 2018, p. 484.)

I live in the Rittenhouse area of Philadelphia, which is part of the city's Residential Parking Permit Zone 1. This zone is quite large; there are a total of 3,687 zoned parking spaces in Zone 1. (It's so big there's a proposal to split it in two. I agree with the proposal, but that's another story.)

So, how many Zone 1 parking permits in force? When I looked into it in 2015, there were 6,957, or roughly two permits for every Zone 1 spot. (Click here to see the story.)

I agree with Professor Shoup that this is a bad outcome, although my analogy is to an overstuffed trash can. But how do you fix it?

The obvious answer is to charge more money for the permit. Currently the Philadelphia permit costs $35 a year, and the price is uniform across the whole city. Every zone pays the same price, regardless of the demographics or congestion of the zone. The current process for setting the price is essentially political, and it is not doing the job that I would like it to do.

Over the ensuing years I have kept coming back to this problem. Fairly early on, I decided that each zone needed to be assigned its own price. The neighborhoods of this city are simply way too varied for a single price to fit all.

But how to determine those prices? For several years, I thought the best idea would be to simply float the price up, a little bit each year, until the number of permits in the zone was in rough equilibrium with the number of spaces.

Then, last year, I was reading Shoup's new book, and on page 484 I discovered the uniform-price auction:

"Consider how a uniform-price auction would work on a block with 20 on-street parking spaces reserved for residents. Any resident can bid for a permit. The bids are ranked in descending order and the highest 20 bidders receive permits. In a uniform-price auction, all the winning bidders then pay the same price: the lowest accepted bid. All successful bidders except the lowest bidder thus pay less than what they bid."

I think this basic idea could work in Philadelphia. It would tend to increase the cost of having a car, but the current permit rate is clearly a subsidy for private car ownership, and as a matter of public policy I think we should move away from that.

Test it out in a few neighborhoods, like mine, that are both prosperous and highly congested. And see what happens. I suspect that the initial opposition - a given for any innovation in Philadelphia - might quickly give way to quiet satisfaction.

See also All the Whining Will Be the Sound of Change, Parking: Storage v. Access.