REGULATING TAXI SERVICES IN THE PRESENCE OF CONGESTION EXTERNALITY

Document Type

Journal Article

Publication Date

2005

Subject Area

operations - traffic, policy - fares, policy - congestion, economics - profitability, economics - profitability, organisation - competition, organisation - regulation, mode - taxi

Keywords

Traffic congestion, Taxi services, Social costs, Regulation, Profitability, Monopoly, Gridlock (Traffic), Fares, Externalities, Equilibrium (Economics), Economic analysis, Competition

Abstract

Conventional economic analyses of competition and regulation in the taxi industry have paid little attention to congestion externalities due to both occupied and vacant taxi movements together with normal vehicular traffic. This study investigates the nature of equilibrium and regulation in the taxi market by taking account of congestion externalities and adopting a realistic distance-based and delay-based taxi fare structure. The monopoly, the social optimum and the stable competitive solutions are examined and illustrated with a numerical example. Findings indicate that the loss to the taxi firm at the first-best solution is less than the cost of vacant taxi-hour. In fact, the profit at the first-best solution can become positive when traffic congestion rises to a certain level.

Comments

Transportation Research Part A Home Page: http://www.sciencedirect.com/science/journal/09658564

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