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The Ho Chi Minh City (HCMC) taxi industry is a nascent and lucrative market characterized by high demand and exponential growth in number of companies and fleets. This brings rampant malpractices: fast meters, price-gouging, “ghost” taxis, and Local Monopoly – a unique phenomenon where firms pay a monthly fee to local authorities (e.g. hospitals, nightclubs) to secure monopoly status where their cabs circulate. These complexities compounded by lax enforcements prompted my year-long investigation into the underlying market structure of the HCMC taxicab industry.
After a revision of market structures, I narrowed the possibilities to Monopolistic Competition (MC) and Oligopoly. I explored: a) number and size of fleets, b) competition methods (price and non-price, presence of cartel and collusion), and c) barriers to entry (brand loyalty, economies of scale, infrastructure set-up costs). To answer my research question I designed experiments where I observed for three hours at a time at selected locations governed by Local Monopoly, noting passengers’ choice of transport – “monopoly cabs”, or those flagged and dispatched from other firms. I also conducted interviews and a passenger survey.
The CR4 index calculated from fleet size information alone is a low 29.4%, compounded by large number of firms, seemingly low barriers to entry, lack of collusion and vigorous non-price competition; the industry seems like an MC. However, survey results and Local Monopoly data indicated a high CR4 index (54.7%); big firms enjoy significant brand loyalty or inelastic demand for their product and reap huge economies of scale; market looks more like an Oligopoly. Also, Vietnam’s recent WTO entry leads to the much-needed re-regulation of many industries including the HCMC taxicab market. As sunk or start-up costs increase, “ghost” taxis and small firms would not survive, mergers might occur, and market would likely remain an Oligopoly.