Sunday, July 6, 2014

A defeat for government-backed oligopolies

The taxi medallion system imposed in many cities creates artificial oligopolies, which result in higher prices, scarcity, and poorer service.

Internet-based ride-sharing services like Uber threaten the taxi medallion oligopoly through increased competition.

Rather than responding competitively (by lowering prices or improving services) the medallion holders have usually chosen to sue. 

In the United Kingdom, London transport officials recently gave Uber a green light to operate within the city.

This will be good for consumers, but not so good for those who engage in rent-seeking, anti-competitive behavior.