The on-street parking premium and car drivers' choice between street and garage parking

We introduce a methodology to estimate the effect of parking prices on car drivers' choice between street and garage parking. Our key identifying assumption is that the marginal benefit of parking duration does not depend on this choice. The endogeneity of parking duration is acknowledged in the estimation procedure. We apply the methodology during daytime hours to an area where cruising for parking is absent, street parking is ubiquitous and garage parking is discretely located over space. So, in this area, the average distance to the final destination is longer for garage parking than for street parking. We find that drivers are willing to pay a premium for street parking which ranges from € 0.37 to € 0.60. Given a parking duration of 1 h, we find that the demand for street parking is price elastic: the price elasticity of demand for the share of street parking is − 5.5. However, this price elasticity is much smaller for shorter parking durations. Our estimates imply that even small reductions in street parking prices induce a strong increase in the stock of cars parked on-street. Our estimates also imply that a policy which contains a street premium (so street prices exceed garage prices) is welfare improving, because drivers with longer parking durations are induced to use parking locations that are, on average, farther away, so this policy reduces total walking time.

► We estimate the effect of prices on choice between street and garage parking.
► Street parking is ubiquitous, so on average closer to drivers' final destination.
► Drivers are willing to pay a street parking premium of € 0.37–€ 0.60.
► The share of street parking is much more price elastic for longer parking durations.
► A street parking premium minimizes average walking distance to final destinations.