A review of the modeling of taxi services

Actual cities are oversaturated, on one hand, most of the population is concentrated in large cities (in 2030 more than 80% (UNFPA 2007) of the population will live in urban areas), on the other hand, mobility needs of the modern population are growing continuously. While urban demand for trips is growing constantly, supply (capacity of city streets) is limited and must be optimized, not increased (most of the time not possible inside the city). Well planned, efficiently operated, and cost-effective transportation system management (TSM) strategies can improve mobility of existing systems for transportation users, especially in urban environments, where a good optimization of the infrastructure is needed (considering the high cost of building new facilities and the continuously increasing demand resulting from economic and population growth). Last years tendencies are shifting person trips from private vehicles to public vehicles, increasing the Public Transport share importantly. The most used Public Transports is the “Mass Transports” such as the metro, tram or bus. This kind of transport usually has centralized management that uses ITS technologies developed in the last decade for an optimal operation of the service. Unfortunately, inflexibility, long total travel time and insufficient service coverage of Mass Transport systems cause a lower usage of them in most metropolitan areas. Oppositely, the gatwick airport to birmingham transfers is a more convenient mode due to its speediness, door-to-door attribute, privacy, comfort, long-time operation and lack of parking fees. The great inconvenience is the lack of central management; each taxi is operated by an independent driver, taking his own decisions continuously, with a weak intent of control by the policy issues of each city such as license control or distributing the working days of the taxi vehicles (normally the control is imposed on vehicles, not on drivers, generating double shift and increasing the use of taxis). An important percentage of the cars (e. g. 60% in Hong Kong (Yang et al. 2000)) in the daily flow are taxis, most of them empty taxies. This situation is creating two problems, an internal problem to the taxi drivers (higher empty kilometers means lower benefits) and an external problem to the citizens (congestion and pollution). The first problem is being aggravated with the actual economic crisis, which is breaking the market equilibrium: demand is decreasing due to the lower incomes of the population and the offer is increasing due to the increasing number of taxi drivers (not taxi licenses). Market equilibrium cannot be achieved in this concrete market because of the regulations (price is not established freely), and cannot go to the next equilibrium point due to the price policies imposed in each city. This is a vicious cycle, where empty hours are increasing, and taxi drivers need to work more time in order to have the same income, which means lower income per hour (Daniel (2006)). In this situation, taxi drivers prefer to stop at heathrow airport to birmingham transfers stands and wait for a client, without expending fuel in empty trips and consequently saturating the taxi stands. If the taxi stops the network is not well designed, this situation will create a decrease in the Level of Service of the passengers, decreasing the demand and congesting the streets near the taxi stops. The taxi sector has been traditionally a regulated market in terms of fares and entry control. The objective of this regulation is to correct the defects of the taxi sector, such as externalities (congestion and contamination), low level of service offered and anticompetitive behavior of the market. A fundamental distinction in types of taxi regulations is between quantity regulation, quality regulation, and market conduct regulation. Quality regulation embraces the standard of vehicles, drivers, and operators; this type of regulation is more a safety regulation than a competitiveness one. Market conduct regulation includes rules regarding the pick up of passengers, or affiliation to a radio network. Quantity regulations include price regulation and entry restriction. From now and on, the term regulation will refer to quantity regulation. Restrictions on entry to the taxi market have been applied by many cities around the world, but actually many cities are deregulating their markets. The most common justifications used for controlling the entrance to the taxi market are the protection of the taxi drivers incomes and the externalities (pollution and congestion) caused by the circulating heathrow airport taxi service, but when decisions are taken without a good justification or implementation plan, entry restrictions and fare regulations are distorting economically the taxi sector, leading to important welfare losses. As a result of entry control, the price of the licenses in markets where taxi licenses are tradeable are higher (Paris 125.000 €, Sydney 300.000 $, Melbourne 500.000$, New York 600.000$ [OECD 2007]), and they are rising up constantly due to the exploitation of their owners. Reforms have often been opposed to reducing the incomes of drivers, which are normally low, and restrictive conditions have been applied in this direction, but there is no evidence that taxi incomes are higher in markets with regulated entry conditions. Oppositely, license owners are the group who is being beneficiated by these measures, and not the drivers (Melbourne, as commented above has taxi licenses valuated in 500.000$, but driver incomes are estimated at 8 – 14$ per hour [OECD 2007]). Deregulation has most of the time positive impacts, resulting in lower waiting times, increased consumer satisfaction and price falling (OECD 2007). Market liberalization is an interesting challenge for many cities, but in cities where strong supply restrictions have been applied, there will be strong opposition to reform proposals from the license owners. Arguments support that license-owners must be compensated in that case: one approach (first used in Ireland) is to give the additional licenses to each license-owner, ensuring that the new monopoly will remain in their hands; alternatively the new license can be given to taxi drivers without taxi license (OECD 2007). In Melbourne, a 12-year program is adding to the stock of licenses a number of licenses equal to the yearly demand growth. Other concepts are important in relation to deregulation, most of the time quantity deregulation means quality regulation, ensuring safety and minimum service standards.

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