[sustran] Re: Fare Policies for Taxi Services

[Akshay Mani]

Hi Karthik,

Thanks for your inputs.  What I gather from your inputs is that its
difficult to come up with a set of best practices on price regulation,
given the nature of the taxi/auto-rickshaw markets, and too many factors in
play.

Perhaps understanding the kinds of fare policies that are in place in taxi
markets across different cities, and what Indian cities can learn from
them, would serve better, compared to developing a set of best practices.
 This is what I wanted to understand actually, but I wrongly stressed on
best-practices in my earlier

To answer Eric's earlier comment:  Interestingly, a regulated fare system
in Mumbai for auto-rickshaws and taxis seems to be working well compared to
other cities.  I think it has to correlate in the end with how the supply
and demand match up.  Cities with under-supply (which is also an outcome of
regulation) clearly face challenges in terms of consumers not getting
services at the government regulated fares.  So it seems that the
effectiveness of fare regulation is tied to entry controls in the market as
well.


Thanks again...
Akshay



On Mon, Apr 30, 2012 at 8:58 PM, Karthik Rao-Cavale <krc12353 at gmail.com>wrote:

> Hi Akshay,
>
> I have been recently getting interested in a very similar kind of problem
> - that of understanding how transactions are made in a bazaar economy. For
> Geertz (1978) a Bazaar economy is characterized by poor information on
> price and arduouus search for the best prices. Bargaining and clientelism
> are the two economic institutions that he suggests emerge from the
> structural conditions of information flow in a bazaar economy.
>
> I think this literature within the field of economics and economic
> sociology should be applicable to the auto-rickshaw and taxicab market
> also. Where search is costly, and supply (of labor) is potentially
> "unlimited" the market might develop peculiar characteristics that might
> seem to violate the laws of supply and demand. These patterns have not been
> studied in any great detail, to the best of my knowledge.
>
> On the issue of stipulating prices, the issue is one of making the
> stipulation "self-enforcing". If we see the government regulation as some
> kind of "collective contract" between sellers and buyers, the question for
> research is this: at what point do the incentives line up for a large
> fraction of the sellers to opt out of the collective contract? Obviously,
> while an overwhelming majority of the sellers are still abiding by the
> contract, the marginal seller will lose out on buyers if he/she chooses not
> to do the same. As more and more rickshaw-drivers opt out of the contract,
> they create incentives for everyone else to do the same thing. But this has
> also got to do with the difficulty of search in the market. A buyer will
> speak to three, four autos that he passes by before choosing either to wait
> for a bus or to take the price being offered. The more arduous the search,
> the more likely that drivers who opt out of our "collective contract" do
> not pay a penalty.
>
> Finally, one also needs to take the number of rickshaws on the streets
> into account. Now, this is not entirely a function of the number of autos
> that exist out there, it is also a function of the amount of time each
> driver spends driving. One of the peculiar characteristics about these
> markets is that when there are drivers in the market, prices need not fall
> (because of the poor search conditions). As a result, each driver is making
> less - so he spends even more time driving the streets than he previously
> did - which further decreases the productivity of each driver.
>
> I have very little empirical material to offer (except one paper on
> bargaining by an MIT Economics student) but I think there is a long ways to
> go before we can reasonably commit ourselves to one set of regulations for
> auto-rickshaws. At this point asking for best practices might be more
> counter-productive rather than doing any good.
>
> Regards,
> karthik
>
> On Mon, Apr 30, 2012 at 8:12 AM, Akshay Mani <amani at embarqindia.org>wrote:
>
>> Hi,
>>
>> I think the recent appointment of the Hakim Committee (news link on this
>> is
>> provided below) in Mumbai by the Govt. of Maharashtra to come up with a
>> government regulated fare fixation formula for auto-rickshaws and taxis is
>> a good time to initiate a discussion on fare fixation for taxi and
>> auto-rickshaw services.  Proponents of taxi market regulation indicate the
>> issue of imperfect information in this market, calling for some level of
>> regulation, particularly in the stipulation of fares.
>>
>> Are there any best practices on taxi fare policies from different cities,
>> which could help answer this debate?   Particularly for the Indian
>> context,
>> insights on some of the following questions would be extremely useful:
>>  where has regulation worked perfectly in fare estimation; what formula
>> and
>> input factors are used for fare estimation; how frequently are fares
>> revised; how are viewpoints of different stakeholders (driver unions,
>> passengers) managed in arriving at and revising fares; are there cities
>> where unregulated taxi markets are working well, etc.
>>
>> Looking forward to some insightful comments.
>>
>> Thanks,
>> Akshay
>>
>> *
>> News on Hakim Committee:*
>> *
>>
>> *
>>
>> http://www.hindustantimes.com/India-news/Mumbai/State-again-appoints-Hakim-committee-to-decide-auto-taxi-fares/Article1-840297.aspx
>>
>>
>> --
>> Akshay Mani
>> EMBARQ India
>> Mumbai
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