This thesis investigates the properties of an aggregate taxi service model with general bilateral searching and meeting functions, which characterize the meeting frictions between vacant taxis and customers. Three specific issues are analyzed theoretically for meeting functions that exhibit increasing, constant and decreasing returns to scales, respectively. Firstly, the market profitability at social optimum is examined, and it is found that taxi services should be subsidized at social optimum only when there are increasing returns to scale in the meeting function. Secondly, both service quality in terms of customer waiting/search time and average profit per taxi are examined in relation with taxi fleet size, and a Pareto-improving win-win situation is identified, where an increase in...[ Read more ]

This thesis investigates the properties of an aggregate taxi service model with general bilateral searching and meeting functions, which characterize the meeting frictions between vacant taxis and customers. Three specific issues are analyzed theoretically for meeting functions that exhibit increasing, constant and decreasing returns to scales, respectively. Firstly, the market profitability at social optimum is examined, and it is found that taxi services should be subsidized at social optimum only when there are increasing returns to scale in the meeting function. Secondly, both service quality in terms of customer waiting/search time and average profit per taxi are examined in relation with taxi fleet size, and a Pareto-improving win-win situation is identified, where an increase in taxi fleet size leads to improvement in both service quality and market profitability. It is found such a Pareto-improving situation emerges if and only if there are increasing returns to scale in the meeting functions. Thirdly, due to the different viewpoints of government and private companies, we investigated the properties of Pareto-optimality via a bi-objective programming approach for simultaneous maximization of social welfare and taxi profit. This thesis proves that the taxi utilization in terms of the percentage of occupied taxi time and the service quality in terms of customer waiting time are constantly equal to those at social optimum only if there are constant returns to scale in the meeting function. However, the cases with increasing (decreasing) returns to scale are examined with different properties of Pareto-optimality. Cost recovery ratio is also explored in this thesis.