ABSTRACT
The results of the experiment with economic deregulation in Seattle are analyzed and lessons learned are discussed in detail. The results were the same in dozens of large cities that adopted laws implementing economic deregulation. The characteristics of a perfectly competitive market are examined: many small companies, no significant barriers to entry or exit, an undifferentiated product or service and complete information about prices. The unregulated taxicab market fostered by economic deregulation is found not to be a perfectly competitive market because of transition to an independent contractor industry, several submarkets exist and operate differently, and consumers could not compare prices. Taxicab industry submarkets include prearranged taxicab service, stand-and-hail taxicab service (taxicab stand walk-ups and hailed cruising taxicabs), personal taxicab service and wheelchair accessible taxicab service. Other reasons for market failure are identified and particularly oversupply. Price elasticity of demand (PED) is revisited and distinctions made between elastic and inelastic demand. The PED for the taximeter rate change in 2005 is computed. The concept of cross-price elasticity of demand (XPED) is defined. A summary of the reasons for competitive market failure are identified. The decision to deregulate is criticized in detail and two methods for determining the maximum number of taxicab licenses needed are proposed.
