Evaluation Of A Taxi Sector Reform: A Real Options Approach
AbstractThis paper applies the real options methodology to estimate the impact of the restructuring measures in the taxi sector in Barcelona in 1995. These measures included among other things the establishment of a fixed price for the license as a way to reduce the uncertainty on the future performance of the sector. We construct a model that contains the uncertainty in income as well as costs of the taxi driver using both individual and aggregate data. We also consider the option to sell the license at each point in time. We show that such reform can increase the net surplus value for taxi drivers with respect to a liberalized market in this sector. We compute the surplus value as a result of this reform to be around € 80,000. This value is shown to be robust to an exhaustive sensitivity analysis.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by CEMFI in its series Working Papers with number wp2003_0312.
Date of creation: Dec 2003
Date of revision:
License price; net surplus value; real options; Monte Carlo simulation; continuous-time model; model implementation.;
Find related papers by JEL classification:
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
This paper has been announced in the following NEP Reports:
- NEP-ACC-2004-04-25 (Accounting & Auditing)
- NEP-ALL-2004-04-25 (All new papers)
- NEP-CFN-2004-04-25 (Corporate Finance)
- NEP-COM-2004-04-25 (Industrial Competition)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bergstrom, A.R., 1984. "Continuous time stochastic models and issues of aggregation over time," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 20, pages 1145-1212 Elsevier.
- Schwartz, Eduardo S, 1997. " The Stochastic Behavior of Commodity Prices: Implications for Valuation and Hedging," Journal of Finance, American Finance Association, vol. 52(3), pages 923-73, July.
- Longstaff, Francis A & Schwartz, Eduardo S, 2001. "Valuing American Options by Simulation: A Simple Least-Squares Approach," University of California at Los Angeles, Anderson Graduate School of Management qt43n1k4jb, Anderson Graduate School of Management, UCLA.
- Cairns, Robert D. & Liston-Heyes, Catherine, 1996. "Competition and regulation in the taxi industry," Journal of Public Economics, Elsevier, vol. 59(1), pages 1-15, January.
- Heston, Steven L, 1993. "A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options," Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 327-43.
- Elizalde, Abel & Repullo, Rafael, 2004.
"Economic and Regulatory Capital: What is the Difference?,"
CEPR Discussion Papers
4770, C.E.P.R. Discussion Papers.
- Abel Elizalde & Rafael Repullo, 2004. "Economic And Regulatory Capital. What Is The Difference?," Working Papers wp2004_0422, CEMFI.
- Aleix Calveras & Juan José Ganuza & Gerard Llobet, 2005.
"Regulation and opportunism: How much activism do we need?,"
Economics Working Papers
935, Department of Economics and Business, Universitat Pompeu Fabra.
- Aleix Calveras & Juan-José Ganuza & Gerard Llobet, 2005. "Regulation And Opportunism: How Much Activism Do We Need?," Working Papers wp2005_0508, CEMFI.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Araceli Requerey).
If references are entirely missing, you can add them using this form.