Economics EE Plan

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The Research Ques,on:

To what extent does the Singapores taxi industry, opera,ng as an oligopoly have an eect
on the increasing fare prices?
Ra,onale:
Studying about market structures made me very interested in exploring their applica,on in real life
markets. The taxi industry of Singapore is a market that intrigued me in par,cular. Singapore is well
known for the great quality of its public transport. As a regular consumer of taxis in Singapore, I
wanted to inves,gate the reasons as to why taxi fares are constantly on a hike and as to why
consumers have to bear the high fare prices. It made me wonder that perhaps the markets nature
and the governments control are such that consumers have no power to inuence fare prices. I
was enthused and excited about nding out the answers and hence decided to carry out this study.
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Areas of syllabus to be covered:
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Theory of Firms
Assump,ons of the Theory - Oligopoly
Number of Firms
Barriers to Entry
Sunk Costs
Mutual Interdependence
Implica,ons of Theory
Abnormal Prots
Collusion vs Non-collusive oligopoly
Asymmetric Informa,on
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Possible Sources of Informa,on
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Newspaper ar,cles
Blog posts
Ocial government websites
Business databases
Ques,onnaires
Interviews
Outline of Extended Essay (Contents)
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1.
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Introduc,on to the Taxi Industry
the features of the Singapore taxi industry; who, what, where, when and why
- development of the industry over the years
Taxis are predominantly operated by large companies, which require a Taxi Operator Licence (TOL)
from the Land Transport Authority (LTA).
Taxicabs are a popular form of public transport in the compact sovereign city-state of Singapore.
Companies:
- ComfortDelegro: (Comfort/City cab)
- SMART Corpora,on
- Trans-cab services
- Premier corpora,on
- Prime leasing
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Hypothesis:
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I hypothesise that the taxi industry to a great extent is oligopolis3c in nature due to the 2 or more
large rms controlling the market. This as a result allows the rms to have power over fares paid by
consumers. Due to informal collusion and all rms having the same price, leaves consumers with no
ability to choose.
This EE will aim to explore:
- the current situa,on of the taxi industry
- factors aec,ng fare hikeshow much of the industry being oligopolis,c contributes to that
- what the industry will be like in long-run/future
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2. Approach to the Ques,on
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How will I go about solving/coming up with solu,ons for this research ques,on
analysis of several secondary resources in rela,on to the topic
carry out primary research in the form of ques,onnaires or interviews
3. Theory
Assump,ons of the Theory - Oligopoly

Number of Firms
Barriers to Entry
Sunk Costs
Mutual Interdependence
Implica,ons of Theory
Abnormal Prots
Collusion vs Non-collusive oligopoly
Asymmetric Informa,on
Non-price compe,,on
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4. Analysis of Singapores Taxi Industry (applica,on of theory)
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Freedom of entry into market

- the market has signicantly expanded over the years implying the few barriers to entry
Knowledge of the market
- asymmetric informa,on; rms have access to knowledge that consumers do not
Collusion between rms
- rms to engage in collusion; though may not be ocial or explicit, it exists
The taxi operators in Singapore form what is known as an oligopoly, where a small group of ve
taxi operators are majority owned by the same group of shareholders and have inter-linking board
of directors, and where market collusion rather than compe,,on tends to be the nal result.
Government interven,on
- the government keeps strong control over the industry. Its not 100% privately operated.
- government has a say on the fare prices
- the government also somewhat has a control on the number of rms able to enter the industry
- mindful of what benets them
- i.e no monopoly (ineciency, too high prices)
- or perfect compe,,on (too much consumer control/power)
Changes in Taxi fares
- constant increase in fare prices;
- explore the various reasons for the increase (e.g newer vehicles,
The price mechanism has failed badly in the taxi industry such that it is opera,ng like a perfect
compe,,on, whereby whenever one operator increase prices, the others will follow, Dr Lee said.
If we are talking about luxury goods, it is their freedom to do so. But taxi industrys posi,on
should be somewhere between public and private, so the Government cannot be blind to this.
Demand/elas,city of taxis
- inelas,c in nature
- taxis in Singapore being one of the most common forms of public transport (more luxurious)
tend to always be high in demand.
- consumers have no choice but to pay extra peak hour surcharges and bear with the constant
hikes in fares
- taxis are so in demand, theyre ohen hard to get during rush hours or during heavy rains.
5. Conclusions
- good or bad? !
- impact on stakeholders!
They are instead an example of an,-compe,,ve behaviour that will end up hur,ng
both consumers as well as taxi drivers. The only en,,es that will benet are the taxi
companies.
"The big player sets the pace and inuences the market price."
6. Evalua,on
- Successful or not?
- predic,ons for the future

Economics EE Plan

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The Research Ques,on:

Outline of Extended Essay (Contents)

Introduc,on to the Taxi Industry

Assump,ons of the Theory - Oligopoly

Freedom of entry into market

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