Nov
03

Caught Cabs

uberUber/Lyft solved a market failure deliberately created by municipalities who, acting as monopolists, prevent free entry and exit into taxi markets. To protect against unwanted market entry, licenses were required that were difficult to obtain. Taxis were made artificially rare and prices were raised. By breaking the monopoly, Uber/Lyft enhances welfare. If Lyft/Uber reduces vehicle purchases as we share existing cars more intensively, that would be an added welfare enhancement.

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