An economic analysis of the effect of Uber on taxi medallion values

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2017

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Montana State University - Bozeman, College of Agriculture

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Licensing requirements in taxi markets in the form of medallion systems are a common regulatory tool employed to regulate U.S. taxi industries. Such a system creates profits--i.e., rents--by restricting entry to the market. These profits are reflected in taxi medallion values, which are as high as $1.32 million in New York City. Changes in demand for taxi services result in decreased profits and thus decreased medallion values. In this thesis, I measure the effect of the introduction and expansion of Uber, a ridesharing company, which causes a decrease in the demand for taxi services. Estimates of the aggregate losses to the taxi industry in each of the four cities range from $387 million in Philadelphia to $9.6 billion in NYC.

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