Evaluation Of A Taxi Sector Reform: A Real Options Approach
This 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.
|Date of creation:||Dec 2003|
|Date of revision:|
|Contact details of provider:|| Postal: Casado del Alisal, 5, 28014 Madrid|
Web page: http://www.cemfi.es/
More information through EDIRC
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.:
- 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.
- 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.
- 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.
- 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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:cmf:wpaper:wp2003_0312. See general information about how to correct material in RePEc.
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.