An Econometric Approach to Demand, Supply and Service Quality in the Taxi Industry

Abstract

This paper uses data collected during various unmet demand studies to build econometric models of the taxi market. The aim is to use these models to derive the elasticities of demand for taxis with respect to price and service quality. It is found that the cross-sectional approach adopted fails to pick up any significant service quality effects. The price elasticity was about -2 under a constant elasticity formulation, and ranged between -2.5 to -3.5 if allowed to vary with price