Even as parking meter technology improves to handle credit cards and flexible pricing, one relic remains:  pay-in-advance.  You have to commit to a period of time and pay the meter at the beginning of that time interval.  You are fined if you don’t move before your pre-specified time expires.

Wouldn’t it be better if you paid only at the end and only for the amount of time you actually occupied the parking space?  This is easily implemented in smart parking meters:  you swipe your card when you park and you swipe it again when to pay when you are done.  To prevent scofflaws, if you never swipe the second time the rest of the day’s parking is on you (sorta like the lost ticket fee in parking lots), and if you are parked in a meter that wasn’t swiped the first time you get a ticket.

Holding fixed the meter rate and demand for parking such a switch would lower your total parking bill and hence revenues.  To show this you could try writing down a model where the parker has a probability distribution over waiting times and chooses optimally his parking time, but there is a simpler argument.  With pay-in-advance two things can happen:  either you pay for more time than you actually use or you get a ticket and pay a fine!

But switching to pay-as-you-leave parking must surely increase overall demand for parking and may even increase individual parking spells so the net effect on revenue is not so clear.

While we are on the subject I liked Tyler Cowen’s bit about free parking.  But I think that there is a second-best logic that justifies mandatory free parking in the suburbs.  Homeowners want their streets free of cars (but still the option to park on the street when necessary) and they don’t want parking meters on their sidewalks.  This makes strip-mall parking a public good.  The private incentive of commercial developers is to provide too little parking.