SPATIAL EQUILIBRIUM OF TAXI SPOT MARKETS AND SOCIAL WELFARE

Abstract

There exist thick market externalities in taxi spot markets: the more taxies gather at a market, the more customers will visit the market, and vice versa. There always works the positive feedback mechanism in such ways that as more taxies and customers visit the market to transact the service, transaction costs can be reduced and the market functions more efficiently. In this paper, an equilibrium model of multi spot markets is presented considering both agglomeration mechanism caused by thick market externalities and dispersion mechanism caused by transaction costs. We have shown that there is a possibility of multiple equilibria, and analyzed the social efficiency of the respective equilibria.