Welfare Implications of Congestion Pricing: Evidence from SFpark

Congestion pricing provides an appealing solution to urban parking problems. By charging varying rates across areas based on their congestion levels, congestion pricing shifts demand and allows a better allocation of limited resources. It aims to increase the accessibility of highly desired public goods for commuters who value them, and reduce traffic caused by drivers searching for available parking spaces. Using data from the City of San Francisco both before and after a congestion pricing scheme was implemented in 2011, we estimate the welfare implications of the policy. We use a two-stage dynamic search model to estimate consumers' search costs, distance disutilities, price sensitivities and trip valuations. These estimates then allow us to conduct welfare comparisons. We find that congestion pricing increases consumer welfare in popular areas, but when implemented in less-congested areas, it may actually hurt consumer welfare. In one of the districts under study, consumers ended up searching more, parked further away and paid more. Interestingly, despite the improved availability, congestion pricing may actually increase traffic due to cruising (searching for parking), as price sensitive consumers start to search for inexpensive parking spaces, particularly when prices are highly dispersed geographically. Through counterfactual analyses, we find that a simple three-tier pricing policy, which eliminates the search for a lower price, can significantly increase welfare and achieve more than 50% of the welfare increase achieved by a full price information benchmark.