Theory meets practice in the taxi industry: Coase and Uber

This paper demonstrates how the transformation of the taxi industry is an example of Coase’s Theorem in practice. The Coase Theorem, as postulated by Nobel Laureate Ronald Coase (1991), is one of the simplest yet profound ideas in economics. The recent advent of new mobile app entrants in the regulated taxi industry, (such as Uber and Lyft) based on: technology, disruptive innovation; mobile app based businesses; using digital practices with smartphones as the core platform, have allowed the recent and ongoing transformation of the city defined, regulated and oligopolistic taxi markets; with value–added effects. The mobile app taxi companies and their business actions are reducing transaction costs, increasing social utility and disaggregating the structure of firms – in keeping with Coase’s Theorem.