Modeling and analyzing a taxi market with a monopsony taxi owner and multiple rentee-drivers

Abstract Taxis offer round-the-clock, comfortable, and direct transportation services. In many cities, a large number (or all) of taxi drivers are rentee-drivers who rent taxis from taxi owners. Therefore, interaction exists between taxi owners and rentee-drivers. To regulate taxi markets effectively, it is necessary to model such interaction and investigate how different regulatory regimes affect stakeholders in taxi markets (e.g., taxi owners, rentee-drivers, and customers) and system performance (social welfare) in the presence of such an interaction. This study extends the classical aggregate taxi model to describe the supply of rentee-drivers and their interaction with a monopsony taxi owner. A general supply function is proposed to describe the supply of rentee-drivers in the market. A profit-maximization model and a social welfare maximization model are proposed to describe the decision-making process of the monopsonist and the government, respectively. Analytical and numerical studies are given to illustrate the properties of the proposed models and investigate the effects of fare adjustments and taxi rent/fleet size regulations on the monopsonist, rentee-drivers, customers, and system performance, thereby providing insights into taxi market regulations.