On the optimal target curbside parking occupancy rate

Donald Shoup, following Vickrey, has long advocated cashing out free and underpriced parking. How should this be implemented for curbside parking in practice, considering the stochasticity of curbside parking vacancies? Shoup has proposed adjusting meter rates such that, for each block and time period, a target (average) curbside parking occupancy rate of 85% is achieved. This paper develops a simple structural model of stochastic steady-state curbside parking in an isotropic space, solving for the surplus-maximizing occupancy rate and the corresponding meter rate. By increasing curbside occupancy, a curbside parker imposes a curbside parking externality. The optimal meter rate internalizes this externality. The central comparative static result is that, ceteris paribus, the optimal occupancy and meter rates are higher, the higher is demand relative to curbside parking capacity. This suggests that, in practice, the occupancy rate should be higher in more trafficked locations and at busier times of the day.