Taxicab licence value and market regulation

In this article, we model the value of a taxicab licence as the present value of profits generated by quotas on the number of licences set by the Regulator. We propose a calibrated model to simulate the impact of different public policies. We then use French data to estimate this model and show that the value of the licence decreases with the number of licences, but increases with the size and wealth of the city population. Applying this model, we deduce an indirect estimation of the elasticity of demand with respect to availability of the service (number of taxicabs) of 0.78. Hence a 75% increase in the number of taxicabs could occur in France before eliminating the value of the licence.

► The value of a taxicab licence depends on present value of profits generated by quotas on the number of licences.
► We use French data to estimate the impact of quotas on the value of a licence.
► The value of a taxi licence decreases with the number of licences, but increases with the size and wealth of the city population.
► We estimate an elasticity of demand with respect to availability of the service (number of taxicabs) of 0.78.