Thursday, September 19, 2019

Coasian solution to parking externalities

Below is a diagram of the parking situation at my house. Eight parking spots and seven cars to fill them. Spots A, B, and C are the least desirable due to the possibility of being parked in. Spots D, E, and F are solid, but if you're parking in one of the A, B, and C cars you may be called on to move your car. Spots G and H are the best - neither being parked in nor parking anyone else in. No spots are assigned - first come, first park.



A doable situation, EXCEPT for the fact that one of my housemates who we'll call John has a stick shift car, which imposes a large negative externality on the house. No one else knows how to drive stick shift, so whenever John's car is parked in D, E, or F and John isn't home, one of the cars from A, B, or C is stuck. At the beginning of the year this inconvenienced all of the other drivers of the house at different times. Eventually the other 6 drivers of the house all decided to give John a permanent spot in either G or H. This costs the rest of the house by confining them to generally worse spots. I, for one, have not parked in G or H since making the decision to leave John a spot. However, by exchanging my right to park in G or H more for the right to not be parked in by an immovable car, I (and the rest of the house) am left better off. The market of our kitchen table conversation enabled a mutually beneficial exchange where the externality was mitigated. We judged the amount of parking utility we were losing by being parked in by John greater than the lost utility of one of the best spots in the house. This solution was not mandated by a rental company, and John gets to keep his car.

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