Journal of Student Research 2018

46 Journal Student Research presence of ride-sharing platforms operating in similar markets. These challenges make it difficult for taxi drivers to proactively compete with additional competition, after being subjected to various barriers to entry and government regulations. Ride-sharing companies can ultimately raise taxi drivers’ income over time, not lower them, due to the possibility of drivers choosing to sell their services to both taxi fleet owners and to companies like Uber. From this perspective, more competition on the market means higher income for taxi drivers who choose to earn supplemental income driving for Uber over an extended period (Salmon, 2013). Although ride-sharing transactions may benefit consumers and ride-share companies, they impose a serious threat to the taxi industry and the government programs that depend on tax revenue that taxis produce. Millions of dollars in tax revenue is generated through taxi services, according to Edelman and Geradin (2016) “in 2014 New York City collected $359 million in revenue by selling 350 taxi licenses, while other cities charge fees based on vehicle revenue. Circumventing the need for such permits, transportation platforms thus withhold the corresponding revenue from cities” (p.29). Although ride-sharing companies impose some negative externalities, such as traffic congestion and wear and tear on public infrastructure, there is no incentive for them to collect and pay taxes. “Official” taxi drivers, who are the legal owners of taxi medallions, are faced with high barriers to entry into the industry; thus, the value of becoming a driver is decreasing. Serious strategy improvements are needed to remain competitive with ride-sharing platforms. From a governmental perspective, the taxi industry provides tax revenue for infrastructure and other state projects. With the decrease of taxi utilization, the tax revenue for critical government projects is in jeopardy. According to economic theory, when additional producers enter a marketplace, a rightward shift in the supply curve will occur. The assumption is made that the service from taxi drivers is the same as the service of Uber drivers and customers are indifferent between the two providers when price is held constant. As shown in Figure 1, this increase in supply will cause the equilibrium price of the good or service to decrease. In the case of ride sharing, the increase in the supply of transportation services, such as ride sharing platforms, is associated with a decrease in taxi fares. This framework assumes that the availability of supply of transportation Conceptual framework