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Taxi service with heterogeneous drivers and a competitive medallion market

Lewis Lehe and Ayush Pandey

Journal of Urban Economics, 2022, vol. 131, issue C

Abstract: This paper incorporates two novelties into steady-state, macroscopic models of street-hail taxi service: (i) heterogeneous drivers; (ii) explicit treatment of a competitive rental market for medallions (the rights to cruise for passengers). When drivers vary only by reservation wage, issuing medallions raises every driver’s take-home pay, and the social optimum requires subsidy. When drivers vary only by marginal cost, issuing medallions may hurt drivers with low-enough marginal costs. Also, when quality declines with marginal cost, the social optimum may require a binding medallion quota or tax.

Keywords: Taxis; Transportation; Medallions; Regulation (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.jue.2022.103488

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