Competetive strategy in disrupted taxi markets : an exploratory case study into New York city

Abstract

Strategy has been all but regulated out of the taxi industry for the better part of the last century. While such far-reaching entry, pricing and quality regulation may have produced favourably uncompetitive and profitable markets for taxi firms in the past, today, they constrain the competitive response of traditional taxis to fast growing rideshare platforms. In a first step towards motivating compelling taxi strategy, this thesis aims to understand how the growth of rideshare platforms effects competition in established taxi markets. Nine years of taxi trip data and three years of rideshare trip data are retrieved from the New York City Taxi and Limousine Commission and employed using a log-log random effects regression model to estimate the elasticity of traditional taxis demand with respect to Uber. Demand elasticity estimates are reported at the market level, as well as across spatiotemporal axes. The findings from this analysis suggest that the value proposition of traditional taxis is strongest in densely populated urban areas, but not immune to erosion. The findings also suggested that without competitive response from traditional taxis, the rideshare substitution effects grows over time.