Testing for Fairness in Regulation: Application to the Delhi Transportation Market

Subrato Banerjee

Journal of Development Studies, 2015, vol. 51, issue 4, 464-483

Abstract: I report a remarkable finding, that regulatory authorities, who have no a priori knowledge of Rabin's 1993 fairness axioms (associated with a very specific utility function), have always proposed legal fares in the auto-rickshaw (three-wheeler) market in New Delhi that satisfy them. Regulated fares are ignored by auto-rickshaw drivers and customers. They bargain on prices among themselves. Newly announced fare hikes are effective enough to ensure the prevalence of legal uniform (non-negotiated) prices for a considerable amount of time. I suggest that the two of the most recent hikes have satisfied Rabin's fairness axioms. The results, I report, are robust to different cooperative games of bargaining.

Date: 2015
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DOI: 10.1080/00220388.2014.963566

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