Regulating urban parking space: the choice between meter fees and time restrictions

On-street urban parking spaces are typically regulated by either a meter fee or a time restriction. This paper shows that, when the off-street parking market is perfectly competitive, meter fees are more efficient than time restrictions. When on-street parking is free, albeit subject to a time restriction, too many drivers choose to engage in socially wasteful searching for on-street spaces. In contrast, with a meter fee, the relative benefit of parking on-street is reduced, and total search costs can be minimised. A linear meter fee structure is shown to be optimal. A simple policy prescription is also proposed. Set on-street meter fees equal to off- street parking fees. Finally, a simple numerical model calibrated to central London suggests that the use of optimal meter fees increases parking welfare by around 5 per cent over an optimal time restriction.