--- "Robert A. Book" <[EMAIL PROTECTED]> > at a time X1, they price goes up to $Y per minute, and everybody whose car is on the lot at that time pays $Y per minute until either they leave, or the price goes down at time X2?<
Yes. In congestion pricing, every agent in the congested space pays the same amount at that time. > And that all of > X1, X2, and Y are > known in advance with certainty? For analysis, let us assume this, to show what the efficient price is with certainty. > Part of the problem here is that the number of > spaces has to be an integer. This means that the "marginal" consumer, the "marginal" value, etc., are (strictly speaking) undefined.< We can determine the efficient price if the number of spaces is a continous variable, then relax the premise to integers and see if there is any significant difference. The real world has integers: the next apple, the next pencil. If we rule out integers, we can't analyze the real world. > These concepts require continuity. Then economic theory does not apply to the real world. > When the lot is full, the price is high enough > that nobody wants to pay for a space Nobody extra. If we assume that people have diverse subjective values for parking places, and so the demand curve slopes down, then those who paid for a space have a positive consumer surplus. If all have identical an marginal willingness to pay, then the price is such that all are indifferent between parking or not, so the lot fills up with those whose coin toss is "park". > Are you assuming that > (a) the space stays empty for a while and everybody > still in the lot pays zero for that time, Yes, so long as there is an empty space. > or (b) that the price drops a bit, and > somebody else immediately takes that space? After the peak time, demand falls, and parkers will leave spaces empty unless the price drops. It does not matter whether new cars replace previous parkers or the old ones stay. > If you do this, I expect you will find that the > price is sometimes zero (at periods of low demand), If it is a private lot, and parkers are willing to pay more than zero, there being no free alternative, why would the lot owner not charge a positive price? Fred Foldvary
