Price Regulation and Optimal Service Standards: The Taxicab Industry

Price Regulation and Optimal Service Standards: The Taxicab Industry

In a market of cruising taxis price competition is impracticable, and service (measured by waiting time) cannot be differentiated by customers' willingness to pay. This article examines the principles governing the setting of efficient prices to attain the maximum use of the service.

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Deregulating Taxi Services: A Word of Caution

This paper studies pricing and capacity decisions in markets for phone-ordered taxicabs. Firms first choose capacities and then compete in prices. As firm demand increases, so does waiting time. This dampens competition and makes prices too high from the social point of view. Efficiency improves if firms choose large capacities. In a two-firm setting, equilibrium capacities are shown to be larger if both firms maximise total profits than if they maximise profits per cab.

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