Wednesday, July 11, 2007

Taxi Inefficiencies

Sorry for the lack of any posts in a bit. Tyler Watters, a good friend from high school and even back to elementary school is visiting for 17 days. We´re doing a whirlwind tour of Brazil. We started in Rio, then went to Florianopolis, then went to Iguazu Falls, then went to Salvador, and now are in Porto Seguro until Sunday when we go back to Rio (where I´m living this year) to catch the Pan-American Games. I have lots of cool pictures that I will get up at some point, but the taxis here in Porto Seguro so badly reek of inefficiencies I had to break the posting drought.

Taxis can be a great thing. They can reduce the overall vehicle fleet in a city, supplement mass transit for those without cars, allow tourists and visitors to not have to rent a car, and reduce the space needed for parking.

But one aspect of taxis can be terribly inefficient: queues. Have you ever seen 5 taxis waiting outside at, for instance, a restaurant when it will take all night for 5 people to need one? And then when one taxi finally gets a passenger he comes back and goes to the end of the queue and there are once again 5 taxis waiting for way too few people. That´s an inefficient taxi queue. This happens more abroad than in the US, but it can happen anywhere.

But the inefficiencies of the taxi queues in Porto Seguro are worse than normal. Taxis here get very high fares by any standard. I´d say it costs 5 times as much for a cab here as it does in Rio, even though everything else here is much cheaper than Rio. And also they don´t use fare meters, which presents even more opportunities to rip people off. What this means is that a lot of people want to carry passengers in their taxi, which inflates the supply (both in terms of number of vehicles and hours of operation) way beyond the socially optimal point. When someone can easily make US$15 or $20 for a single passenger trip, they will go to great lengths to carry a passenger.

So the queues here can get ridiculous. Last night there were 14 taxis (plus at least 5 motorcycle taxis) near where we went out yet I would guess that only 3 people ended up using one. Yet those 14 waited there probably an average of 5 hours each. But here´s the ridiculous part. For those that did actually get to carry a passenger, it was totally worth the long wait. And taxi queues prevent competition because all the cab drivers know they have to force an passenger to negotiate with the first cab. So while the last cab would be willing to take you for $2, in Porto Seguro you are forced to pay the first cab say $15.

Today we asked our hotel to call us a cab to go out at about midnight. When the cab came, it was a lady that had awoken from bed to come get us. And she lived on the other side of the city! So she dropped us off, we paid the ridiculous fare, and then she told us she would get up again to pick us up. Nevermind that we woudn´t be getting home for 5 or 6 hours. The first time she came she made the same amount as a construction worker would all day, and if she could do it twice!

We actually didn´t end up calling her, even though she had offered us a steep discount since coming to get us would allow her to avoid the tyranny of the queue. The guy at the front of the queue had been there all night without a single passenger, and it looked like he would soon have to go home without a passenger, and given our excellent BATNA (best alternative to negotiated agreement), he matched her price in a heartbeat.

This isn´t to say queues can´t serve a purpose. At least if they´re in a queue, they aren´t wasting gas driving around. And they have to wait somewhere, so might as well have a shot at a passenger. And high volume queues, like at an airport, can be great. But when the queue sucks because prices are completely out of whack, the system just looks flawed.

But taxi inefficiencies can be rampant, and are all over the world. And of course I´m just complaining about it when at some point some brilliant entrepreneuer will develop a GPS system that helps coordinate taxis better. I can´t wait.

What are your inefficient taxi stories from abroad? Or just vents about taxis and taxi drivers in general?

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