Should markets of autonomous taxis be regulated?

Autonomous taxis seem closer than ever before. Scholars agree that they have a disruptive potential for today’s transportation systems, especially for the taxi industry, as costs will significantly drop. Whether this will be beneficial to society or not, remains ambiguous. Economics shows that market structure and regulation matter for social welfare. Little research, however, has been conducted on markets of autonomous taxis, leaving policy- makers in doubt whether and how to regulate this emerging market. This question becomes urgent as the first larger publicly accessible services have been announced for 2019. This paper applies the economics of industrial organization and regulation theory to markets of autonomous taxis. As they do not yet exist, we describe our expectations, on which we base our analysis of market imperfections and potential regulation, building on lessons learnt from taxi regulation as the closest existing proxy. Our main policy-related findings are: ▪ We expect the market of autonomous taxi services to be significantly different from today’s taxi industry, mainly in terms of economies of scale, relevance of locality and information asymmetries. ▪ Therefore, regulating it similar to today’s taxicabs might do more harm than good, especially concerning regulation of entry and price. ▪ Subsidies for ride sharing/pooling at peak hours might prove necessary to reduce congestion and increase accessibility and equity. Being descriptive and qualitative in its nature, this paper seeks to stimulate the academic exchange on this important topic by contributing propositions to discuss and build upon