1 Before Uber, how were prices set in NYC? Was it a competitive market?

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Expert Solution

Before the entry of Uber into the taxi service market of New York City, fares in New York City with respect to taxi services were set by the Taxi and Limousine Commission of New York City.

This commission sets the rate and reviews them every alternate year to see whether ay revision in fare is needed or not.

The taxi service market was not a competitve market. This is due to the fact that there are barriers to entry. A person who wants to ply taxi in New York City has to obtain a medallion from Taxi and Limousine Commission.

These medallions are not freely available and are limited in quantity.

This limited quantity acts as barrier to entry in Taxi service market in New York City and makes it more of monopoly than competitive market.

Secondly, TLC has market power to set fare due to its control of supply of medallions needed to ply taxi. In competitive market, prices are set taking into account market demand and market supply. This is not the case in taxi service market in NYC and thus this was not a competitive market.

Rahul Sunny answered 1 year ago

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