Fighting for Fares: Uber and the Declining Market Price of Licensed Taxicabs

Alina Garnham () and Derek Stacey

No 21001, Working Papers from University of Waterloo, Department of Economics

Abstract: In this paper, we study how the emergence of Uber in a large North American city affects the market price of taxicab licenses. A taxicab license provides a claim to a stream of dividends in the form of rents generated by operating the taxicab or leasing the license. The introduction of Uber undoubtedly affects the anticipated stream of dividends because Uber drivers capture part of the farebox revenue that might otherwise go to the owners/drivers of licensed taxicabs. At the same time, the launch of Uber's innovative technology-driven approach to the provision of ride-hailing services can be viewed as a partial obsolescence of the traditional taxicab approach. The economic incentives facing market participants may therefore change as Uber gains momentum in the ride-hailing market, which could further affect the market value of licensed taxicabs. Using transaction-level data, we apply a theory of asset pricing to the secondary market for Toronto taxicab licenses to explore these potential price ef- fects. We learn that both the farebox and innovation effects contribute to the overall decline in market value. The farebox effect explains approximately 60% of the price decline; the innovation effect can account for the rest.

JEL-codes: G12 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2021-07, Revised 2022-04
New Economics Papers: this item is included in nep-com, nep-pay and nep-ure
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https://uwaterloo.ca/economics/sites/ca.economics/ ... icensed_taxicabs.pdf (application/pdf)

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Working Paper: Fighting for Fares: Uber and the Declining Market Price of Licensed Taxicabs (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:wat:wpaper:21001

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