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Taxi service with heterogeneous drivers and a competitive medallion market

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  • Lehe, Lewis
  • Pandey, Ayush

Abstract

This paper incorporates two novelties into steady-state, macroscopic models of street-hail taxi service: (i) heterogeneous drivers; (ii) explicit treatment of a competitive rental market for medallions (the rights to cruise for passengers). When drivers vary only by reservation wage, issuing medallions raises every driver’s take-home pay, and the social optimum requires subsidy. When drivers vary only by marginal cost, issuing medallions may hurt drivers with low-enough marginal costs. Also, when quality declines with marginal cost, the social optimum may require a binding medallion quota or tax.

Suggested Citation

  • Lehe, Lewis & Pandey, Ayush, 2022. "Taxi service with heterogeneous drivers and a competitive medallion market," Journal of Urban Economics, Elsevier, vol. 131(C).
    • Handle: RePEc:eee:juecon:v:131:y:2022:i:c:s0094119022000651
    DOI: 10.1016/j.jue.2022.103488
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