Frictions in a Competitive, Regulated Market: Evidence from Taxis

Guillaume R. Fréchette, Alessandro Lizzeri and Tobias Salz

No 24921, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper presents a dynamic general 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. This 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-codes: J22 L0 L5 L91 (search for similar items in EconPapers)
Date: 2018-08
New Economics Papers: this item is included in nep-com, nep-dge, nep-pay and nep-tre
Note: IO
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Published as Guillaume R. Fréchette & Alessandro Lizzeri & Tobias Salz, 2019. "Frictions in a Competitive, Regulated Market: Evidence from Taxis," American Economic Review, vol 109(8), pages 2954-2992.

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Related works:
Journal Article: Frictions in a Competitive, Regulated Market: Evidence from Taxis (2019)
Working Paper: Frictions in a Competitive, Regulated Market Evidence from Taxis (2016)
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