Local Taxi Monopolies versus Competition

Short Essay: Taxis versus Ride Sharing Services

Microeconomics
Essay 2
Short Essay: Taxis versus Ride Sharing Services
Due: _________________
Format: Times New Roman, 12-point font, double-spaced
Length: 2 pages minimum

Local Taxi Monopolies versus Competition

In order to operate as a taxi driver, drivers must obtain limited ‘medallions’ issued by the city. These
permits are very expensive, in some cases costing about $200,000. In addition, drivers and their vehicles
must meet costly safety requirements that cut into their profits. With the advancement of smartphones,
people can now request a driver to take them from point A to point B. These drivers use their private
vehicle to operate like a taxi.

1. Distinguish between a competitive market (i.e. perfect/monopolistic competition) and a noncompetitive
market (monopoly). What characterizes each market structure? What are some
positives and negatives about each? In the case of taxis, what are the barriers to entry?

2. According to the articles you read, what are the arguments provided by taxi drivers for why ride
sharing services need to be monitored? What do ride sharing services such as Uber and Lyft argue
in defense? Make reference to the articles in your essay; state the title of the articles.

3. In your opinion, should ride sharing services be allowed to operate freely without having to meet
the same requirements as taxi drivers? Or should the government step in treat Uber and Lyft like
a taxi company and require them to bid for one of the limited ‘medallions’ in a city? Is this a case
of unfair competition? Or unwanted competition?

A few resources [feel free to look for other material on the topic]:

• Studio SoCal. New Ridesharing Economy. [PBS]. Retrieved from http://www.pbs.org/video/studiosocal-
new-ridesharing-economy/

• Pathe, S. (2014, October 2). Uber the unfair? Are ridesharing firms exploiting deregulation? PBS
Newshour. Retrieved from https://www.pbs.org/newshour/nation/uber-unfair-ride-sharing-firmsexploiting-
deregulation

• Hirst, N. & Posaner, J. (2017, September 22). If Uber can’t make it in London, then where? Politico.
Retrieved from https://www.politico.eu/article/uber-london-europe-ecj-tfl-kalanick-paris/

• Edwards, J. (2014, November 28). Uber is destroying the value of taxi monopolies in a bunch of
American cities. Business Insider. Retrieved from http://www.businessinsider.com/uber-destroyingvalue-
of-taxi-monopolies-cartels-2014-11

• Segarra, M. (2017, April 3). New York’s taxi economy implodes. Marketplace. Retrieved from

New York’s taxi economy implodes