Frictions in a Competitive, Regulated Market: Evidence from Taxis
By Guillaume R. Fréchette, Alessandro Lizzeri, Tobias Salz. The American Economic Review, 2015
140 citations recorded by the source corpus.
This paper presents a dynamic equilibrium model of a taxi market. The model is estimated using data from New York City yellow cabs. Two salient features by which most taxi markets deviate from the efficient market ideal are, first, matching frictions created by the need for both market sides to physically search for trading partners, and second, regulatory limitations to entry. To assess the importance of these features, we use the model to simulate the effect of changes in entry, alternative matching technologies, and different market density. We use the geographical features of the matching process to back out unobserved demand through a matching simulation. The matching function exhibits increasing returns to scale, which is important to understand the impact of changes in this market and has welfare implications. For instance, although alternative dispatch platforms can be more efficient than street-hailing, platform competition is harmful because it reduces effective density. (JEL C78, L51, L84, L92, L98, R48)
Subfields: Automotive Engineering, Economics and Econometrics, Marketing
View Paper: https://www.semanticscholar.org/paper/668fa41b80e5361a7b190c020d1c00fa3bc3eea0
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Citations in the corpus
- Surge Pricing Solves the Wild Goose Chase (2017, background): “Given this segmentation assumption it may be easier to interpret our markets as representing different times, as in the analysis of Frechette et al. (2016), rather than different places within a city; in either case our static model that leaves out substitution and complementarity across markets is…”