A Flat Fee SufficesTaxi Cab Phenomenon in Singapore

Bernard Leong@bleongcw or http://bernardleong.com

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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

What Taxi Drivers think they do

What Taxi Companies think they do

What LTA hope they do What we think they do

What Customers want them to do

Taxi Drivers in Singapore

What they want to do

3

The Policy Maker

4

General Numbers

Sources: LTA: Public Transport Figures, Updated as of April 2012http://www.lta.gov.sg/content/lta/en/corporate/facts_figures/statistics/public_transport.html

Taxi Population: 3%Average Passenger Trips (Taxis): 933K

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Others6%Premier

8%

SMRT12%

TransCab16%

Comfort & City Cab58%

Taxi Brands in Singapore Breakdown

Operating Profit on Taxis

Comfort-Delgero(Annual Report 2011):

S$216M

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Public Transport Ridership

0

1000

2000

3000

4000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

MRT Bus Taxis

Aver

age

Dai

ly R

ider

ship

(K)

Year7

The Customer

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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?

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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>?

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My Typical Complaints on Cab Drivers (Out of 10)

0 2 4 6 8 10

“They do not know the route”

“I am a new driver.”

“Complaining about Singapore Government.”

Keeps talking despite the customer wants some peace and quiet

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0

25

50

75

100

3-5 5-7 7-9 10-12

Time Taken for Taxi Cabs to arrive at destination

SMS (71222) Call

How effective are the taxi drivers?

%

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The Taxi Driver

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The Taxi Driver’s Daily AccountExpenditure (S$) Revenue (S$)

Average Rental Price of Cab* $90.00

Average cost of Petrol (or Gas Cost) per day $80.00

Miscellaneous Costs $40.00

Average Earn-out (12 hours shift of S$30 per hour) $360

Profit Earned per day $150

Earnings per month (20 Days of Work) $3,000

*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/

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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.

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Demand & SupplyWhy is it hard to call a cab at certain times of the day?

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Perverse Incentive

Why are cabs flashing “On Call” or “Hired” during certain hours with so many people trying to hail cabs in the city?

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Directed Random Walk

Why are cabs queuing at these places?

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Where does all this lead to?

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The interests of the customers, policy makers & taxi drivers are

not aligned.20

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My solution: Impose a higher flat fee, say $5.50 with no special surcharges.

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“Reality is not a matter of opinion. Raw opinion is like math errors or typos - understandable human error but uninformative. To err is human, to understand is hard work”- Alan Reynolds, “Income & Wealth”

@bleongcw23