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some private taxi drivers will prey on tourists by overpricing their services by 3x and waiting at airports. Since their rip-off prices are displayed right ther

some private taxi drivers will prey on tourists by overpricing their services by 3x and waiting at airports. Since their rip-off prices are displayed right there in the window, it's fully legal. Tourists don't know the typical price of a taxi, and fresh off an airplane are not sure what the local currency rate is (Sweden isn't on the Euro), and hence get ripped off. Typically this should lead to more competition there. Is something preventing that? Taxi thug groups (i.e. cartels), lack of space, ..? If the price and product are clear, and if there's opportunity for competition, well.. I don't want to sound too libertarian, but, you know... :)

wavefunction 10y ago
Taxi thugs? Thug means someone who intimidates with threats of violence to get their way. Why would any taxi-driver feel like upsetting the apple-cart?
- nothrabannosir 10y ago
  Intimidating competitors. The taxi industry is notorious for this. Of course it's only a few bad apples that ruin the basket, but it's not unheard of.
zzleeper 10y ago
Not really. There is an econ paper that explains why (Xavier Gabaix's shrouded prices theory), but the idea is this: There are some consumers that are naive (tourists in this case) and you can exploit them (go to the airport, and wait until you get a naive guy). Now, suppose a competitor can find a way to educate consumers: you print pamphlets listing the true costs and hire someone to distribute them everywhere. Now tourists are well informed, but what's the benefit for the competitor? It just did something expensive but now he faces informed guys that will only pay the competitive price. So in equilibrium no one will teach the naive consumers.
- vasco 10y ago
  Except you could just put a billboard right there in the airport exit saying how much an average trip to the city center costs for very little money.
  - Bartweiss 10y ago
    I'm pretty sure I've seen exactly this - information booths at airports saying "this is what a licensed cab looks like, this is the fare to downtown, don't be fooled". It's not universal, though, because you'd need to get rights to put up the sign.
    - dagw 10y ago
      Also, at least in Sweden, each licensed taxi company sets their own fares so the problem isn't one of licensed vs unlicensed taxis. A sign saying you shouldn't pay more than X to get down town could work, but who gets to decide what X is?
- yamaneko 10y ago
  Such a simple explanation, makes perfect sense.
- nothrabannosir 10y ago
  Or just set up a taxi next to it for 2.5x the price? Or maybe force taxis at airports onto a centralised exchange with a big electronic comparison billboard that everyone can see? I get that something is preventing that, otherwise we wouldn't be having this conversation. But what is? Can we fix that instead and make the market more accessible? If not, then regulate away, of course.
  - dagw 10y ago
    Or just set up a taxi next to it for 2.5x the price? There's almost certainly a taxi next to it that only charges X, and all taxis are required to clearly post their prices in their windows. The taxi charging 3X is simply banking on the fact the enough people are operating with incomplete information and will just hop into the first taxi they see without fully understanding how the system works.
Bartweiss 10y ago
Taxi ranks at (wealthy) airports are almost never subject to market competition. To avoid crowding and crime, some number of drivers or companies get permission to pick people up at the airport, and everyone else is shut out. Other taxis can drop you off, but not pick up a return fare. Usually this comes with fixed prices to avoid extortion, but if it doesn't you get this oligopoly pricing. Incidentally, this is part of the vehement objection to Uber - on-demand pickup still happens, which breaks the stranglehold on cab ranks.
deleted 10y ago
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wavefunction 10y ago

Taxi thugs? Thug means someone who intimidates with threats of violence to get their way. Why would any taxi-driver feel like upsetting the apple-cart?

nothrabannosir 10y ago
Intimidating competitors. The taxi industry is notorious for this. Of course it's only a few bad apples that ruin the basket, but it's not unheard of.

zzleeper 10y ago

Not really. There is an econ paper that explains why (Xavier Gabaix's shrouded prices theory), but the idea is this: There are some consumers that are naive (tourists in this case) and you can exploit them (go to the airport, and wait until you get a naive guy). Now, suppose a competitor can find a way to educate consumers: you print pamphlets listing the true costs and hire someone to distribute them everywhere. Now tourists are well informed, but what's the benefit for the competitor? It just did something expensive but now he faces informed guys that will only pay the competitive price. So in equilibrium no one will teach the naive consumers.

vasco 10y ago
Except you could just put a billboard right there in the airport exit saying how much an average trip to the city center costs for very little money.
- Bartweiss 10y ago
  I'm pretty sure I've seen exactly this - information booths at airports saying "this is what a licensed cab looks like, this is the fare to downtown, don't be fooled". It's not universal, though, because you'd need to get rights to put up the sign.
  - dagw 10y ago
    Also, at least in Sweden, each licensed taxi company sets their own fares so the problem isn't one of licensed vs unlicensed taxis. A sign saying you shouldn't pay more than X to get down town could work, but who gets to decide what X is?
yamaneko 10y ago
Such a simple explanation, makes perfect sense.
nothrabannosir 10y ago
Or just set up a taxi next to it for 2.5x the price? Or maybe force taxis at airports onto a centralised exchange with a big electronic comparison billboard that everyone can see? I get that something is preventing that, otherwise we wouldn't be having this conversation. But what is? Can we fix that instead and make the market more accessible? If not, then regulate away, of course.
- dagw 10y ago
  Or just set up a taxi next to it for 2.5x the price? There's almost certainly a taxi next to it that only charges X, and all taxis are required to clearly post their prices in their windows. The taxi charging 3X is simply banking on the fact the enough people are operating with incomplete information and will just hop into the first taxi they see without fully understanding how the system works.

Bartweiss 10y ago

Taxi ranks at (wealthy) airports are almost never subject to market competition. To avoid crowding and crime, some number of drivers or companies get permission to pick people up at the airport, and everyone else is shut out. Other taxis can drop you off, but not pick up a return fare. Usually this comes with fixed prices to avoid extortion, but if it doesn't you get this oligopoly pricing. Incidentally, this is part of the vehement objection to Uber - on-demand pickup still happens, which breaks the stranglehold on cab ranks.

deleted 10y ago

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