In: Business and Management

Submitted By thirboy
Words 794
Pages 4
Problem #1 Part a. There are two decision rights allocations that are affecting this tragedy of the commons. The first is that students’ parking permits allow them access to any parking spot at any time of day, regardless of the level of congestion. One student’s use of a parking space confers an obvious private benefit, while it also imposes a social cost on the other students in the form of one less parking space available. Second, professors have the right to schedule their classes when they see fit. When a professor schedules her class, she is likely considering how its timing affects her schedule, and weighing the benefits of holding class in the late morning or early afternoon. What she is unlikely to consider is the cost she is imposing on students outside her class in the form of increased demand for parking at that time, and a corresponding lack of available parking spaces. The tragedy will almost certainly manifest itself in the form of high parking congestion during the late morning and early afternoon. (Ironically, outside these times the parking lot may actually be underutilized.) Many students will hold parking permits, but the permits will do them little good when there are so many other students taking up the available spaces. Some students may resort to arriving at campus well before their classes start in an effort to beat the rush, which would impose a potentially significant opportunity cost on their time and intensify the commons tragedy. The commons tragedy could be alleviated through several potential mechanisms. Raising the price of parking permits would reduce the number of permits sold, resulting in fewer “owners” of the common resource. Students would have a strong financial incentive to buy a permit as a group and carpool to campus. A variation on this would be to sell specific permits for different parking…...

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