Journal of Student Research 2018

The Impact Of Uber’s Presence On Taxi Fare to limit their supply, for example, the city of Seattle distributes only 55 taxicab medallions in a lottery system. In turn, this leads to a high purchase price. With the sudden increase in supply due to the growth of ride-sharing platforms, the price of the New York City taxi medallion has decreased. Several studies propose deregulation for the taxi industry to level the playing field against the ride-sharing industry (Chen, 2015; Edelman & Geradin, 2016; Gevero, et al., 2015). Other studies look at the effects of a disruptive competitor in the airline industry. One such study displayed that direct or adjacent competition is associated with an increase in route traffic and a decrease in the average fare (Swelbar & Wittman, 2013). The results from the airline industry demonstrate the intensity of airfares decreasing over time, which may apply to the taxi industry. Studies on the effect of ride-sharing platforms on taxi fare have yet to be completed. This study will add to the literature by identifying the relationship between the downward pressure on taxi fare and the presence of Uber. There are several benefits and efficiency gains that have occurred from the success of ride-share platforms, including decreased transaction costs, improved information distribution, and pricing efficiencies (Edelman & Geradin, 2016). For example, the technology used in ride-sharing platforms has reduced transaction costs associated with finding an individual to exchange a ride service with by connecting the rider to the driver almost instantaneously. Platforms allow users to request a ride, receive a price estimate, access information regarding the make and model of a vehicle, receive an estimated time of arrival, and complete payment for the transaction in a matter of seconds. The U.S. taxi medallion industry faces volatility in long-term profitability as the ride-sharing model continues to decrease utilization rates. The taxi industry is highly regulated by the government and has several restrictions for drivers. In several cities, taxi drivers must complete training and pass assessments to receive their taxi driver certification. These regulations also impose barriers of entry for taxi drivers. Comparatively, to become an Uber driver, across Uber markets, require a valid driver’s license from the DMV, to pass a background and driving record check, and to own a car that is insured and less than ten years old. The low barriers to entry allow ride-sharing platforms to expand by circumventing the barriers in the traditional transportation market (Edelman & Geradin, 2016). The taxi industry faces additional challenges when there is a Background

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