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.
Topic: 1.3 Taxi
There are economies of scale for very small taxicab firms, but over 75,000 trips per year average costs increase, so the curve is U-shaped.
Professor Shreiber, author of the article and later rejoinder published in this Journal in September 1975 and September 1977, replies to the comment by David J. Williams which appeared in January 1980.
A comment on the article and later rejoinder by Professor Shreiber, published in this Journal in September 1975 and September 1977.
In a free market the charges for taxicabs tend to be high. Regulation in New York City has not been properly designed to achieve economic efficiency; but abolition of the present restriction on entry will increase congestion and pollution and attract more passengers from public transport.
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.