WS responds: >Not necessarily, if the main form of 'entering the transaction' is hailing a taxi as opposed to calling one. Here is why. When you call a taxi dispatcher and do not like their prices, you may simply hang up and keep calling other companies until you hear what you like. That is, the transaction cost of 'investigating the market' is only several phone calls worth perhaps five minutes of your time.
>When you hail a taxi and you do not like the price the driver is quoting
you, your choice is to keep hailing until you hear the offer you like, or
say 'fuck it' and take the first available cab, regardless of the price.
Unless you are detrmined to wait for the 'right-priced' taxi to become
available which may take an hour or more -- a rather high transaction cost
that may outweigh any savings you may get from a lower fare.
>So my guess is that the fares would remain largely unchanged, or even go
up to cover for the capital losses you mentioned earlier. An the 'market'
(i.e. us) will have to bear it or take the subway. <
It's true that the "asymmetric info" problem rears its ugly head here. But it seems pretty obvious that the cabbies would have an incentive to paint the price they're charging on the outside of the cab ("Cheap Cab! Only 25 cents per half-parsec" or whatever). This might make the cabs more ugly (and encourage other ugliness in the form of billboards and advertising bus-benches), but it would encourage price competition. This would be also be spurred by the existence of a decent public transit system, something we also don't have in L.A.
(How do poor people get to work? They often spend tremendous amounts of time on the excessively expensive and broken-down bus, going first to downtown and then to their work (and vice-versa in the p.m.) But there are also horror stories of people driven (as it were) to homeslessness because their cars broke down, making it impossible to get to work, to pay the rent, etc.)
Jim Devine jdevine at popmail.lmu.edu & http://clawww.lmu.edu/Departments/ECON/jdevine.html Los Angeles, the city of your future: the city of smog, traffic jams at 2 a.m., unfinished subway systems, earthquakes, modern slavery, fires, mudslides & sinkholes, civil disturbances (a.k.a. riots or rebellions), OJ, the Menendi, and Heidi Fleiss (daughter of our nephew's pediatrician).