Economics EE Plan
Short Description
EE outline...
Description
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The Research Ques,on: ‣ To what extent does the Singapore’s taxi industry, opera,ng as an oligopoly have an effect on the increasing fare prices?
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Ra,onale: Studying about market structures made me very interested in exploring their applica,on in real life markets. The taxi industry of Singapore is a market that intrigued me in par,cular. Singapore is well known for the great quality of its public transport. As a regular consumer of taxis in Singapore, I wanted to inves,gate the reasons as to why taxi fares are constantly on a hike and as to why consumers have to bear the high fare prices. It made me wonder that perhaps the market’s nature and the government’s control are such that consumers have no power to influence fare prices. I was enthused and excited about finding out the answers and hence decided to carry out this study.
! Areas of syllabus to be covered: !
Theory of Firms • Assump,ons of the Theory -‐ Oligopoly • Number of Firms • Barriers to Entry • Sunk Costs • Mutual Interdependence
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Implica,ons of Theory • Abnormal Profits • Collusion vs Non-‐collusive oligopoly • Asymmetric Informa,on
! ! Possible Sources of Informa,on ! -‐ -‐ -‐ -‐ -‐ -‐
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Newspaper ar,cles Blog posts Official government websites Business databases Ques,onnaires Interviews
Outline of Extended Essay (Contents)
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Introduc,on to the Taxi Industry
the features of the Singapore taxi industry; who, what, where, when and why -‐ development of the industry over the years Taxis are predominantly operated by large companies, which require a Taxi Operator Licence (TOL) from the Land Transport Authority (LTA). Taxicabs are a popular form of public transport in the compact sovereign city-‐state of Singapore. Companies: -‐ ComfortDelegro: (Comfort/City cab) -‐ SMART Corpora,on -‐ Trans-‐cab services -‐ Premier corpora,on -‐ Prime leasing
! Hypothesis: !
I hypothesise that the taxi industry to a great extent is oligopolis3c in nature due to the 2 or more large firms controlling the market. This as a result allows the firms to have power over fares paid by consumers. Due to informal collusion and all firms having the same price, leaves consumers with no ability to choose. This EE will aim to explore: -‐ the current situa,on of the taxi industry -‐ factors affec,ng fare hikes…how much of the industry being oligopolis,c contributes to that -‐ what the industry will be like in long-‐run/future
! 2. Approach to the Ques,on ! •
How will I go about solving/coming up with solu,ons for this research ques,on • analysis of several secondary resources in rela,on to the topic • carry out primary research in the form of ques,onnaires or interviews
3. Theory
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Assump,ons of the Theory -‐ Oligopoly • Number of Firms • Barriers to Entry • Sunk Costs • Mutual Interdependence
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Implica,ons of Theory • Abnormal Profits • Collusion vs Non-‐collusive oligopoly • Asymmetric Informa,on • Non-‐price compe,,on ‘
! 4. Analysis of Singapore’s Taxi Industry (applica,on of theory) !
• Freedom of entry into market -‐ the market has significantly expanded over the years implying the few barriers to entry • Knowledge of the market -‐ asymmetric informa,on; firms have access to knowledge that consumers do not • Collusion between firms -‐ firms to engage in collusion; though may not be official or explicit, it exists The taxi operators in Singapore form what is known as an oligopoly, where a small group of five taxi operators are majority owned by the same group of shareholders and have inter-‐linking board of directors, and where market collusion rather than compe,,on tends to be the final result. • Government interven,on -‐ the government keeps strong control over the industry. It’s not 100% privately operated. -‐ government has a say on the fare prices -‐ the government also somewhat has a control on the number of firms able to enter the industry -‐ mindful of what benefit’s them -‐ i.e no monopoly (inefficiency, too high prices) -‐ or perfect compe,,on (too much consumer control/power) • Changes in Taxi fares -‐ constant increase in fare prices; -‐ explore the various reasons for the increase (e.g newer vehicles, The price mechanism has failed badly in the taxi industry such that it is opera,ng like a perfect compe,,on, whereby whenever one operator increase prices, the others will follow,” Dr Lee said. “If we are talking about luxury goods, it is their freedom to do so. But taxi industry’s posi,on should be somewhere between public and private, so the Government cannot be blind to this. • Demand/elas,city of taxis -‐ inelas,c in nature -‐ taxis in Singapore being one of the most common forms of public transport (more luxurious) tend to always be high in demand. -‐ consumers have no choice but to pay extra peak hour surcharges and bear with the constant hikes in fares -‐ taxis are so in demand, they’re ohen hard to get during rush hours or during heavy rains.
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5. Conclusions - good or bad? ! - impact on stakeholders! • They are instead an example of an,-‐compe,,ve behaviour that will end up hur,ng both consumers as well as taxi drivers. The only en,,es that will benefit are the taxi companies. • "The big player sets the pace and influences the market price."
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6. Evalua,on -‐ Successful or not? -‐ predic,ons for the future
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