A Flat Fee Suffices: Taxi Cab Phenomenon in Singapore


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Have you ever wondered why you are never able to get a taxi during certain times of the day in Singapore? Have you ever wondered why the taxi drivers are always complaining? Are the incentives really that bad for them? Gathering some anecdotal evidence coupled with economics and physics, I seek to analyze the cultural phenomenon of taxi cabs in Singapore. At the end, he presents a solution based on free market and competition to how the problem might be solved.

Presented in Blinkbl-nk on 20 June @ Blu Jazz, Singapore: http://blinkbl-nk.com/

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A Flat Fee Suffices: Taxi Cab Phenomenon in Singapore

  1. 1. A Flat Fee SufficesTaxi Cab Phenomenon in Singapore Bernard Leong @bleongcw or http://bernardleong.com 1
  2. 2. Outline• Why are things the way they are? Three perspectives: policy makers, customers & taxi drivers.• What is the problem? Demand & Supply, Perverse Incentives, Random Walks.• How do we really solve the problem? 2
  3. 3. Taxi Drivers in Singapore What Taxi Companies What Customers wantWhat they want to do think they do them to doWhat LTA hope they do What we think they do What Taxi Drivers think they do 3
  4. 4. The Policy Maker 4
  5. 5. General Numbers Taxi Population: 3% Average Passenger Trips (Taxis): 933K Sources: LTA: Public Transport Figures, Updated as of April 2012http://www.lta.gov.sg/content/lta/en/corporate/facts_figures/statistics/public_transport.html 5
  6. 6. Taxi Brands in Singapore Breakdown Others Premier 6% 8%SMRT 12% Comfort & City Cab 58%TransCab Operating Profit 16% on Taxis Comfort-Delgero (Annual Report 2011): S$216M 6
  7. 7. Public Transport Ridership 4000 MRT Bus TaxisAverage Daily Ridership (K) 3000 2000 1000 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Year 7
  8. 8. The Customer 8
  9. 9. Let’s start with us, the customers ...• How many of you have taken a taxi in Singapore?• Have many of you encountered a taxi driver who often complained, “Life in SG sucks”?• Have many of you encountered a taxi driver who tells you that he or she is a new driver?• Have you often wondered why you cannot find taxis during certain hours in the day, for e.g. 5-6 pm, 9-11.30 pm? 9
  10. 10. Questions I typically ask ...• How many hours do you drive a day?• What’s the rental rate and petrol you pay per day?• How do you pick up customers?• What’s the take home pay per month?• Why are the taxi drivers <state problem>? 10
  11. 11. My Typical Complaints on Cab Drivers (Out of 10) “I am a new driver.” “They do not know the route” Keeps talking despite the customer wants some peace and quiet “Complaining about Singapore Government.”0 2 4 6 8 10 11
  12. 12. How effective are the taxi drivers? SMS (71222) Call 100 75% 50 25 0 3-5 5-7 7-9 10-12 Time Taken for Taxi Cabs to arrive at destination 12
  13. 13. The Taxi Driver 13
  14. 14. The Taxi Driver’s Daily Account Expenditure (S$) Revenue (S$) Average Rental Price of $90.00 Cab* Average cost of Petrol (or $80.00 Gas Cost) per day Miscellaneous Costs $40.00 Average Earn-out (12 hours $360 shift of S$30 per hour) Profit Earned per day $150 Earnings per month $3,000 (20 Days of Work) *The rentals are based on averages of the prices for rentals for either petrol or gas cars** On average, most taxi drivers I have spoken to reported about $60-$100 petrol or gas depending on fluctuating prices. For more details of daily rentals, check out: http://www.taxisingapore.com/taxi-drivers/daily-rental-rates/ 14
  15. 15. The Taxi Driver’s Tactics• Random: Pick up the customers in designated points or anywhere upon the last destination.• Gaming the system: Take calls & no picking up of customers only during peak hours or dead zone times.• Directed: Pick up the customers only at profitable entry points such as Changi Airport Terminals or casinos.• Fixed Customers: Customers who pay them a fixed fee and require them to ferry at certain times of the day. 15
  16. 16. Why is it hard to call a cab at certain times of the day? Demand & Supply 16
  17. 17. Why are cabs flashing “On Call” or “Hired” during certain hours with so many people trying to hail cabs in the city? Perverse Incentive 17
  18. 18. Why are cabs queuing at these places?Directed Random Walk 18
  19. 19. Where does all this lead to? 19
  20. 20. The interests of the customers,policy makers & taxi drivers are not aligned. 20
  21. 21. 21
  22. 22. My solution: Impose a higher flat fee, say $5.50 with no special surcharges. 22
  23. 23. “Reality is not a matter of opinion. Raw opinionis like math errors or typos - understandablehuman error but uninformative. To err is human,to understand is hard work”- Alan Reynolds, “Income & Wealth” @bleongcw 23