The Economic Reasons for Price and Entry Regulations of Taxicabs. A Comment

The Economic Reasons for Price and Entry Regulations of Taxicabs. A Comment

A comment on the article in the September 1975 issue of this Journal, with the author's rejoinder.

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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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