Ride Sharing Services Lead Taxi Medallion Values To Plummet (And That's A Good Thing)

from the competition-is-good dept

Three years ago, Planet Money did an episode on the ridiculous economics of taxi cab medallions, the protectionist, anti-competition way in which cities keep competition scarce for taxis, and (thus) drive up taxi fares. Yes, sure, the taxi folks will tell you, these medallions are supposed to "regulate" the market to keep it safe, but as pretty much everyone knows, the reality is that they're just to limit competition and keep prices high. So, given all the new pressures on that market from ridesharing* efforts like Uber** and Lyft, it shouldn't come as much of a surprise that taxi medallion prices are plummeting rapidly. They're still high -- for now -- but they're dropping fast and that's likely to continue:

The average price of an individual New York City taxi medallion fell to $872,000 in October, down 17 percent from a peak reached in the spring of 2013, according to an analysis of sales data. Previous figures published by the city’s Taxi and Limousine Commission — showing flat prices — appear to have been incorrect, and the commission removed them from its website after an inquiry from The New York Times.

In other big cities, medallion prices are also falling, often in conjunction with a sharp decline in sales volume. In Chicago, prices are down 17 percent. In Boston, they’re down at least 20 percent, though it’s hard to establish an exact market price because there have been only five trades since July. In Philadelphia, the taxi authority recently failed to sell any medallions at its asking price of $475,000; it will try again, at $350,000.

In cities like San Francisco, there's been a 65% decline in cab use as people shift to these more convenient (and often more affordable) alternatives. And the trend appears likely to continue: The end result appears to be pretty good for users -- who get more convenient, less expensive options for getting around. And, for all the stated fears from the old taxi guys that a glut of new entrants would drive away business, we can just watch what happens and see how the market sorts things out.

* Yes, I know some people hate the term "ridesharing" for these kinds of services. But that's what they're commonly called, and it's perfectly reasonable to call them that.

** Yes, Uber has been getting a ton of bad press lately for a vareity of statements and actions that, at the very least, suggest a rather cavalier attitude towards privacy, and a very aggressive view towards everything else. Thankfully, if you don't like the way Uber conducts its business, there are alternatives.

Filed Under: competition, economics, ridesharing, taxi medallions
Companies: lyft, uber