Xia, Xiaoyu and Chong, Juin Kuan (2022) No Magic for Market Entry in the Field: Evidence from Taxi Markets. Management Science, 68 (6). pp. 4670-4684. DOI https://doi.org/10.1287/mnsc.2021.4099
Xia, Xiaoyu and Chong, Juin Kuan (2022) No Magic for Market Entry in the Field: Evidence from Taxi Markets. Management Science, 68 (6). pp. 4670-4684. DOI https://doi.org/10.1287/mnsc.2021.4099
Xia, Xiaoyu and Chong, Juin Kuan (2022) No Magic for Market Entry in the Field: Evidence from Taxi Markets. Management Science, 68 (6). pp. 4670-4684. DOI https://doi.org/10.1287/mnsc.2021.4099
Abstract
We study taxi markets in Singapore to understand market entry in the field. While market entry games in the lab consistently produce equilibrium outcomes, we show that a lack of market knowledge hinders the markets from consistently reaching equilibrium in the field. In Singapore, a small 720-square-kilometre island city that can be divided into 29 taxi markets, full equilibrium is elusive: 68% of the market-entry decisions made by the 2,728 taxi drivers in our data could be improved. Using three months of earnings and detailed movement data from these taxi drivers, we find an average 20\% gap in marginal wage rates across markets. We use dynamic programming to derive the optimal solution for more than 3 million search decisions and find that only 32% of the searches ended in an optimal market. Finally, we find that market knowledge developed in a given month explains an additional 3% variation of the earning losses in the 2.6 million decisions for the subsequent two months, an improvement in model fit of 74%; while strategic thinking and minimization risk have no impact on earning loss.
Item Type: | Article |
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Uncontrolled Keywords: | market entry equilibrium; taxis; dynamic programming; market knowledge; strategic thinking |
Divisions: | Faculty of Social Sciences Faculty of Social Sciences > Economics, Department of |
SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
Depositing User: | Unnamed user with email elements@essex.ac.uk |
Date Deposited: | 24 Feb 2021 15:58 |
Last Modified: | 30 Oct 2024 19:33 |
URI: | http://repository.essex.ac.uk/id/eprint/29933 |
Available files
Filename: No Magic for Market Entry in the Field Evidence from Taxi Markets.pdf