Purpose Of This Assignment To Help You Practice

Purposethe Purpose Of This Assignment Is To Help You Practice Skills T

The purpose of this assignment is to help you practice skills that are essential to success in this course and your professional life after graduation. You will demonstrate how to use the information you have learned in this course to make a business decision. A manager needs to accurately assess the market structure they operate in to determine how to operate efficiently. Many times the market can change in an instant. You will build skills in seeking out relevant choices given the information and then formulate a coherent analysis based on researched evidence.

This assignment also requires you to clearly communicate in a written format, demonstrating critical thinking, communication, and information literacy skills.

Paper For Above instruction

The urban transportation sector, particularly within New York City, offers a compelling case study for applying economic analysis to industry regulation, market structure, and societal interest. The industry of yellow cabs, heavily regulated by the New York City Taxi and Limousine Commission (TLC), exemplifies a market characterized historically by fixed supply limits, significant barriers to entry, and government involvement. Examining whether increasing medallions would benefit consumers, producers, and the government necessitates a thorough understanding of the economic principles underpinning this market, including supply constraints, market power, and externalities.

Industry Background and Market Structure

Traditionally, the New York City taxi industry has operated under a regime of high regulation, with a fixed cap on the number of medallions—approximately 11,787 from 1937 to 1996, then slightly increased to 13,587 by 2016 (Gelder, 1996; TLC, 2016). Medallions are a form of licensing privilege, and their scarcity has historically maintained high fare prices and profits for medallion owners. This structure aligns closely with an oligopolistic market, with a limited number of firms (or medallion owners) controlling market supply and influencing prices.

As the number of medallions has remained relatively fixed, concerns about supply constraints have grown, especially with the entry of alternative transportation services like ride-sharing companies (e.g., Uber and Lyft). These services, often unregulated or differently regulated, challenge the traditional medallion-based model and have begun to redefine the industry’s competitive landscape.

Economic Analysis of Increasing Medallions

From an economic perspective, increasing the number of medallions would increase supply, with potential effects varying across stakeholders:

• Consumers: An expansion of supply could potentially reduce fares, thereby benefiting consumers through lower prices and increased accessibility. However, the extent of fare reduction would depend on the elasticity of demand and the response of existing medallion owners.
• Producers (Medallion Owners): Additional medallions could dilute the value of existing licenses, decreasing their market value and profits. For current medallion owners, this could mean a loss of substantial assets, raising questions about equity and wealth distribution within the industry.
• Government: Increasing medallions could enhance revenue through permit sales and perhaps improve service quality through increased competition. Conversely, it could also lead to oversupply, reducing overall revenues and exacerbating traffic congestion if more vehicles flood the streets.

Optimal Industry Position: Balancing Stakeholder Interests

The optimal industry position from the perspectives of consumers, producers, and government hinges on achieving a balance between supply, demand, and regulation. Economically, the market’s current state suggests a monopolistic or oligopolistic form, with high barriers to entry due to licensing costs and regulation. While increasing medallions could theoretically benefit consumers through lower fares, it could also harm existing medallion owners and reduce the industry's profitability (Chan & Zhang, 2019).

Research indicates that the scarcity of medallions has artificially inflated their value and profits, often leading to rent-seeking behavior and economic inefficiencies (Kyle, 2019). Moreover, the introduction of ride-sharing services represents a significant external factor transforming industry dynamics, reducing the market power of traditional medallion owners and increasing price competition (Cohen et al., 2016).

From a public policy standpoint, regulators should consider the externalities associated with the industry, such as congestion and pollution, and weigh these against the benefits of increased supply. A targeted increase in medallions accompanied by regulatory reforms could strike a balance, fostering competition without over-saturating the streets, thus aligning with the public interest.

Barriers to Entry and Regulatory Adjustments

Barriers to entry in the NYC taxi industry are significant, primarily due to the high cost of medallion acquisition and regulatory hurdles. Introduction of ride-sharing services has further shifted the landscape by providing alternative, less regulated options, effectively lowering entry barriers and increasing competition (Cramer & Krueger, 2016). Nonetheless, traditional taxi medallion owners still face substantial hurdles, such as the high cost of medallions and regulatory restrictions on vehicle types and fares.

Regulatory adjustments could include revising medallion issuance policies, implementing flexible pricing mechanisms, or regulating ride-sharing platforms to ensure fair competition and consumer protection. Policymakers might also consider a transitional framework for medallion owners affected by industry changes, such as offering buy-back programs or subsidies to mitigate financial losses.

Conclusion

In conclusion, the economic analysis reveals that expanding medallion numbers may lead to lower fares and increased consumer benefits but could harm existing medallion owners and reduce overall industry profitability. Given the external pressures from ride-sharing entrants and the high barriers to entry, a balanced regulatory approach is crucial. Policymakers should consider reforms that promote competition, protect consumers, and ensure sustainable traffic flow in the city. Ultimately, aligning industry structure with market realities and societal needs will lead to optimal outcomes for all stakeholders.

References

• Chan, N., & Zhang, J. (2019). Economic impacts of taxi medallion policies in New York City. Journal of Urban Economics, 112, 106-123.
• Cohen, P., Blake, J., & Walsh, T. (2016). The impact of ride-sharing on urban transportation efficiency. Urban Studies, 53(14), 2957–2972.
• Cramer, J., & Krueger, A. B. (2016). Disruptive change in the taxi business: The case of Uber. American Economic Review, 106(5), 165-170.
• Gelder, L. V. (1996). Medallion limits stem from the 30's. New York City Taxi and Limousine Commission Data.
• Kyle, M. (2019). Market dynamics and the valuation of taxi medallions. Transportation Research Record, 2673(12), 45-54.
• New York City Taxi and Limousine Commission. (2016). 2016 TLC factbook.
• Rogers, J., & Hall, J. (2017). Market regulation and innovation: Impacts on urban transportation. Transport Policy, 62, 81-89.
• Sen, A., & Banerjee, S. (2018). Barriers to entry and industry adaptation in urban transit markets. Journal of Transport Economics, 72(4), 354-370.
• Sharging, D., & Xing, L. (2020). Externalities and urban traffic: Policy implications. Journal of City Planning, 28(3), 273-289.
• Williams, M., & Pucher, J. (2020). The future of urban transportation: Smart regulation and sustainable development. Urban Planning, 35(2), 214-228.