Taxi Industry

(Oligopoly)
Done by: Aishwaria Annabel Baorong Chiew Ling Soniya

8 Firms in Taxi Industry

Premier Taxi

Yellow-Top Taxi

Prime Taxi

CityCab

8 Firms in Taxi Industry (Continued)

Smart Cabs

Trans-Cab

Comfort Taxi

SMRT Taxis

Market Share of Firms

Premier Taxis Prime Taxi Yellow-Top Taxi CityCab Smart Cab Comfort Taxi Trans-Cab

Types of economies of scale by large firms

Internal Economies of scale
Financial Economies Organisational Economies Risk-bearing economies Economies of Scope

Nature of Product
Similar but differentiated through Different levels of luxury or service. For example:
MaxiCab van can sit 7 passengers a large luggage space available Mercedes limo cabs charge higher flag-down fares but offer a greater level of luxury compared to the typical cabs.

Do taxi firms engage in price competition ?

Price Competition
Almost none-existent (due to the property of inter-dependence in this oligopoly) ComfortDelgro is the incumbent player with its dominant position and wide network development. ComfortDelgro prides itself as the market leader with the largest fleet in Singapore (currently hold 62% of taxi market share). Even though taxi fares are not regulated, ComfortDelgro has always been the market leader in setting taxi fares, from major fare structure overhaul that imposed a 35 per cent surcharge during peak-hour travel, to minor tweaking of increased flag-down rate, tempering with late night surcharges, 30 cents fuel surcharge etc.

Price Competition
Since 1998, deregulation of prices. each taxi company can set fares to whatever the market will bear - provided they inform the government and the public in advance. Thus, deregulated fares does not mean unpredictable fares. The drivers must still use the tamper-proof meters. In practice, the differences among the companies are small and restricted mainly to the extras.

Current Taxi Prices

How to tell if Price discrimination is possible?

Ability to set its price : ComfortDelGro taxis impose 30-cent surcharge from 17 July 2007, thus setting it own price. Ability to separate market : All taxis are able to separate the market by charging different prices for different distances and assure consumers charged at lower price cannot resell this service. Different elasticity of demand experienced: Consumers of higher income group view taxi fares as a small proportion of their income, thus it is demand is price inelastic. Consumers of lower/middle income group view taxi fares as a larger proportion of their income, thus it is demand is price elastic.

What type of price discrimination?

Third degree price discrimination Different prices are charged at different independent market based on time. (peak hour market vs. off-peak hour market)

Do taxi firms engage in non-price competition?

Yes, through product development and advertising. An example would be the iphone application launched by Comfort Delgro, where customers can hail their cab through this application.

Product Development
Calling of taxi though iphone application would change the current consumers preference as it is more convenient for them to hail a cab now. This shifts the demand curve from D0 to D1.

Advertising
The application also increase public awareness of the firm. By creating a perceived difference, it reduces its substitutability with other taxi firms. Thus, demand curve becomes less price elastic. Hence, by raising the price, total revenue increase. Thus, profit increases, assuming that costs remained constant(TP=TR-TC) or does not increase as significantly as the total revenue. This allows the firm to be more competitive and capture greater market share.

Main consumers
Taxi services are a luxury. Thus its main consumers would be upper/middle- income households and working adults. Students and consumers from lower income households would prefer using other cheaper alternatives of public transport such as the Bus or MRT as compared to more expensive taxi rides.

Can the firms in the industry prevent resale of their products by one consumer to another?
Definition of resale: The sale of a thing previously bought.
The taxi industry provides consumers with a service(means of transportation), in return for payment as a fare. It is not possible to encounter a resale of their service from one consume to another. The service is meant exclusively for one lone customer only and the service cannot be reused, unlike a product.

"I read from an article years back that once Comfort increases its fares, the rest of the companies will follow suit because they don't want to lose out when the taxi drivers want to change companies to earn more. That's what I read, and I think it makes sense," added Ruby, a freelance writer. Indeed, SMRT reacted fast to its competitor's increments, and also announced fare hikes. The duo was clearly in high spirits when they filmed a video during their first adventure in the car. His handsome boyish looks and great sense of humor proved to be infectious as the passengers happily interacted with Isaac Ong and Ruby Tan, both 23, went out to give free the pair. rides to any Singaporeans after the recent cab fare hikes "Though the idea came out of the recent comfort fare (20-70 cents more flag-down rates) by ComfortDelgro hike, the motivation to do this was more than anything were announced. else to bless Singaporeans from my love for my people The pair pasted a big handwritten sign "FREE RIDES" on than a protest," he said. the bottom left of the black Honda Civic Issac's father "Sometimes when I drive, I see people giving us thumbs readily lent him. They set out to pick up random people up." to extend their little effort to anyone who wants a ride. "Hey, are you guys together?" this reporter threw the On that night, they picked up two passengers. Isaac drove question out. out again yesterday picking up another two lucky "See I told you everyone's been saying that!" Ruby told passengers. Isaac. However, he recognises that their efforts are unable to Both of them laughed it off but quickly added, "No no, change the situation. ". I haven't taken a taxi since the we're just friends." announcement of the fare hikes but eventually I think I "Are you planning to continue doing this?" I asked Isaac. will succumb to it also. But I know it won't be the last." "We'll see. As a Christmas special, we are planning to hit The online attacks came fast and furious with one the road again sometime next week but the time isn't Facebook group called "Boycott Comfort Delgro and its fixed because we have to work around our schedules."