Demand–supply equilibrium of taxi services in a network under competition and regulation

This paper investigates the nature of demand–supply equilibrium in a regulated market for taxi service. Distinguished from conventional economic analysis, a network model is used to describe the demand and supply equilibrium of taxi services under fare structure and fleet size regulation in an either competitive or monopoly market. The spatial structure of the market such as the form of road network and the customer origin–destination demand pattern are explicitly considered. The model can determine a number of system performance measures at equilibrium such as utilization rate for taxi and level of service quality, and predict the effects of alternative regulations on system performance. The model can thus be used as a policy tool by the regulator to ascertain appropriate taxi regulations such as the selection of taxi fleet size and fare structure. A case study in Hong Kong was conducted to illustrate some interesting findings.