[sustran] Re: Fare Policies for Taxi Services

[Muhamad]

Wrong email

Sent from my iPhone

On May 2, 2012, at 5:26 AM, Akshay Mani <amani at embarqindia.org> wrote:

> 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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>>> equitable and sustainable transport with a focus on developing countries
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>>> 
>> 
>> 
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