ECMT Round Tables No. 133 (De)Regulation of the Taxi Industry

the long version

This Round Table examined the basic case for liberalisation of the taxi industry, and reviewed experiences with taxi (de-)regulation in OECD and ECMT member countries. There are a number of aspects to regulation of the taxi industry: regulation of entry into the industry, price regulation and service quality regulation. The discussions of these aspects concluded that little empirical evidence supported the argument that entry restrictions improved capacity utilisation. On the contrary, the case could be made that increased entry and associated economies of density, as well as shorter passenger waiting times, warranted subsidies for entry. The need for price regulation depends on the type and structure of the taxi market. Consumers face search and switching costs when they require taxi services, which gives taxi operators considerable price-setting power. The abuse of that market power is greater in unfamiliar geographic environments and in the cruising market. In markets dominated by dispatch centres, firms may earn a reputation for high or low service prices, which opens up the possibility of some price competition. A similar argument applies to service quality. The more anonymous the market, the greater the need for regulation. Again, dispatch centres enhance the self-regulatory role of competition for repeat customer relations by building a good reputation.--Publisher's description.