Taxi services are a classic case of monopoly through regulation. The canonical example is the medallion in NYC (and other places). These medallions are required

Taxi services are a classic case of monopoly through regulation. The canonical example is the medallion in NYC (and other places). These medallions are required to legally provide a traditional taxi service. They can cost $1M[0] (or can be leased for $1000s/month). The supply of taxis is limited by the restrictions on medallions - already leading to a movement along the demand curve to a point above market-clearing equilibrium (higher cost, lower quantity of transactions). In addition to the decreased supply, there is also a huge fixed cost in the medallion, which forces fares higher still. The primary benefit of Uber, in my mind is that it allows for the elimination of this deadweight loss, and allows taxi-service to be provided on the margin (someone who might provide trips only to and from work on UberX/similar) - maximizing the number of mutually beneficial transactions that occur while minimizing transaction costs. Focusing on the fact that it is an app is a red herring. [0]http://blogs.reuters.com/felix-salmon/2011/10/21/why-taxi-medallions-cost-1-million/ http://blogs.reuters.com/felix-salmon/2011/10/21/why-taxi-me...