Regulation of taxis and the rise of ridesharing

This paper examines the experience with economic regulation of traditional taxicab markets and the effects of newly emerging dynamic rideshare services on the taxicab industry. The paper provides a brief history of the regulation of taxicabs and the development of ridesharing services in cities world-wide. The aim is to show the pros and cons of taxicab regulation and explain why ridesharing services have gained a strong foothold in many markets. Even though economic regulation of taxicab markets has long been questioned, and some cities deregulated their taxi services over the past several decades, most cities have continued to regulate market entry and fares, citing environmental concerns and consumer protection as justifications. The recent development of dynamic ridesharing services, which match drivers with riders using cell phone technology to handle matches and payments, is posing a major challenge to the traditional taxi markets. While some cities have chosen to ban the new services, many others have allowed the rideshare services to compete with taxis, but with far fewer regulatory constraints. This in turn has led to new policy issues: not only whether taxis and ridesharing services should be regulated differently, but more broadly, what regulations are appropriate given the new technologies that are being employed by both traditional taxis and the new services.