Market Failure of the Taxicab Industry Essays

Market Failure of the Taxicab Industry Essays

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I. Overview of the taxicab industry

The Taxicab industry plays a vital and large role in the U.S. urban transportation system, employing 233,000 drivers (United States Bureau of Labor Statistics) and providing transportation to millions of Americans each day. Taxicabs differ most substantially from alternative urban transportation systems, like busses and subways, as customers select the final destination, opposed to adhering to a predefined route. This flexibility is reflected in the higher price of taxicabs (Moore and Balaker) compared to other public transit services. Substitutes for taxicabs include busses, subways, trains, limousines, private drivers, car ownership and rental cars, among others (Brennan).

The taxicab industry can be divided into four primary taxicab market segments, which are important to keep in mind when analyzing the industry (Frankena and Pautler):

1. Cruising cabs: These are taxis that cruise highly populated areas looking for random customers, who hail taxis for a ride.

2. Taxi-stand cabs: Taxi stands can be found at locations, such as hotels and airports, which see a large demand for taxis. Taxis line up in a queue at the stand and wait their turn for a customer.

3. Radio-dispatched cabs: These taxis are assigned a customer from a radio dispatcher who receives customer requests via telephone or the internet.

4. Service-under-contract cabs: In certain cases, groups or organizations will contract a taxicab firm to provide regular or dial-a-ride service.

II. Taxicab regulations in U.S.

The taxicab industry faces carrying degrees of regulations, which differ state-to-state and city-to-city, but is, for the part, heavily regulated. The industry is one of the most regulated transportation industrie...

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Kahn, Sarah. (2014). IBISWorld Industry Report 51711a. Cable Providers in the US. Retrieved from IBISWorld database.

Gurley, Bill. (2014). A Deeper Look At Uber’s Dyanamic Pricing Model. Uber. Retrieved from

Sheth, Jagdish, Sisodia, Rajendra and Sharma, Arun. (2010). The Impact of Demographic Shifts and Facilitating Technology Trends on Future Customer Behavior. Retrieved from

The Nielsen Company. (2013). Mobile Majority: U.S. smartphone ownership tops 60%. Retrieved from majority--u-s--smartphone-ownership-tops-60-.html

Fowler, Geoffrey. (2014). Testing UberX, Lyft and Sidecar Against a Cab in Six Cities. Wall Street Journal. Retrieved from

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