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In: Economics

Why are liquor licenses vastly more expensive in New Jersey as opposed to New York City?...

Why are liquor licenses vastly more expensive in New Jersey as opposed to New York City? why are taxi licences vastly more expensive in New York than New Jersey? how has services such as Uber and Lyft affected the cost of taxi licences?

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Expert Solution

License holders of liquor can resell their license on the private market but only within the municipality that issued it originally. Potential buyers in competitive areas bid up to very high price where the sales are untrackable.They can afford to outbid startups.New Jersey makes it hard to go into business because a potentially significant revenue stream is denied to you. Even chains can’t find licenses from time to time.

There is an oversupply of drivers in New Jersey, and an under-supply in New York because the New York City limits the number of driving licenses and every cab in New York City has to have a medallion.The number of taxi plates stayed basically constant, despite wage growth and population growth and rising demands for cross-town transportation. As a result, their value rose tremendously.

Uber and Lyft has severely reduced the value of licenses, as Uber and Lyft drivers do not need licenses to enter the market. Licenses no longer grant protection from competition. Taxi drivers are no longer able to sell off their licenses as expected, and they are not financially protected against such sudden devaluations.The sale of the medallion halted and decline of the medallion namely that the value was overinflated and the taxi services could not pay any payments."buy a taxi license vs. become an Uber/Lyft driver for free" to enter the business creates unfair competition between the two.

The reported number of complaints per taxi ride in New York decreased after the Uber’s entry into the market which overall damaged the traditional cab industry.

Rahul Sunny answered 2 years ago
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