Introduction
Two central issues for taxi regulation are: (1) What should be the rate of fare?
(2) How many taxicab licenses should be issued? With the failure of
deregulated taxi industries to provide satisfactory service in a number of North
American cities, (Teal and Berglund, 1987), the tasks of setting fares and
service levels remains in the laps of municipal agencies (Dempsey, 1996).
In making decisions about these issues, government regulators need to
know elasticities for fares and service availability. The elasticity of taxi
revenue with respect to the fare is critical to determining the size of fare
increases required to generate a target level of taxi revenue. The elasticities of
service availability with respect to the fare and industry size are critical to
ensuring adequate service levels for the public.