6 Mar 2014

Decision Time: Private or Club Good?

Chris Mah writes:*

Often, people assume resources are limited to natural resources like water, timber, fish, etc., but resources are all around us in our day-to-day lives. I would like to think of parking as a resource and talk about the mismanagement of parking at Simon Fraser University. Currently, SFU employs a parking system where you can either purchase a semester-long parking pass or you can pay hourly or daily. Whether you buy a pass or pay daily at the tollbooth, you are confined to the same parking lot. This makes the good both a club good and private good at the same time, which is where the problem lies.

The management of the lot is all good and fine when the number of people wishing to purchase a daily parking ticket is lower than the number of empty spots, but because the lot capacity is finite, if demand is to increase on any given day, parking becomes rival, even for those who own passes. This happens on days when there are graduation ceremonies and other events that bring in large numbers that would not usually travel up to SFU. Buying a parking pass for a semester is a club good; you should be able to purchase the pass and then park as much as you possibly desire without any competition for a spot. When the parking lot doubles as a private good as well, the spots become rival and competitive. This is a flawed system. Why would someone pay for a pass only to realize that on busy days, it is possible he/she will not receive a parking spot?

A simple solution is to segregate parking for those who own a semester pass and those who wish to park daily. The lot is large enough in size that a simple barrier between sections would be sufficient. Perhaps this will decrease available parking for those who wish to park daily, but the good they are purchasing is rival in the first place.

Bottom Line: Choose either a club or private good, but do not mix the two together.

* These guest posts are from students in my resource economics class at Simon Fraser University. Please leave feedback on their logic, ideas and style and suggestions of how to improve.