Surge Pricing for Cab Fares

by Patrick Liew on March 6, 2017

The Authorities have to ensure that the likely move to adopt surge pricing does not trend towards a cartel-like arrangement and behaviour.

It may result in reducing values of competition, lower productivity, and higher cab fares.

As it is, the small number of companies in the taxi industry has supported the companies in enjoying reasonable profits and growth in the past.

In the presence of little competition, there may be a tendency for these companies to focus less on improving customer-centric products, services and productivity.

They may become more settled in sharing the economic pie and focus more on pricing their fares at a point that is beneficial to every taxi company in the oligopoly.

By modeling a similar surge pricing mechanism that’s popularised by Uber, it suggests a lack of creativity and innovative drive by some of these players to come out with better models, actions and services.

Should the other taxi companies adopt a similar pricing arrangement, there may be a conscious or even subconscious inclination to set a limit on lowering of prices.

Commuters may end up paying high prices and have limited choices and less options for a wider array of desired services.

The Authorities have to take proactive action to ensure taxi companies provide better service to commuters and improve productivity and not just change their pricing models.

Otherwise, it may increase cost of living and business cost.

In a bigger picture, it may impede possibilities for social or economic progress.

It may also erode our competitive edge and attractiveness to foreign direct investments.


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