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Comment by zzleeper | Hacker News Reader

Not really. There is an econ paper that explains why (Xavier Gabaix's shrouded prices theory), but the idea is this:

There are some consumers that are naive (tourists in this case) and you can exploit them (go to the airport, and wait until you get a naive guy).

Now, suppose a competitor can find a way to educate consumers: you print pamphlets listing the true costs and hire someone to distribute them everywhere. Now tourists are well informed, but what's the benefit for the competitor? It just did something expensive but now he faces informed guys that will only pay the competitive price. So in equilibrium no one will teach the naive consumers.

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But isn't this exactly the duty of an entity like, say, the municipality or the airport administration? That's one of the major roles of the state: To step in when there is no profit motive to do the 'right thing'.

But to do that you have to shoot a monkey dead and take all his bananas

(I may have just come from another, less logical subthread in this topic)

Indeed. But I was replying to the pro-libertarian point of view, where municipalities or airport administrations play no role in the taxi industry, which sorts any problems "by itself"

Except you could just put a billboard right there in the airport exit saying how much an average trip to the city center costs for very little money.

I'm pretty sure I've seen exactly this - information booths at airports saying "this is what a licensed cab looks like, this is the fare to downtown, don't be fooled". It's not universal, though, because you'd need to get rights to put up the sign.

Also, at least in Sweden, each licensed taxi company sets their own fares so the problem isn't one of licensed vs unlicensed taxis. A sign saying you shouldn't pay more than X to get down town could work, but who gets to decide what X is?

Or just set up a taxi next to it for 2.5x the price? Or maybe force taxis at airports onto a centralised exchange with a big electronic comparison billboard that everyone can see?

I get that something is preventing that, otherwise we wouldn't be having this conversation. But what is? Can we fix that instead and make the market more accessible?

If not, then regulate away, of course.

Or just set up a taxi next to it for 2.5x the price?

There's almost certainly a taxi next to it that only charges X, and all taxis are required to clearly post their prices in their windows. The taxi charging 3X is simply banking on the fact the enough people are operating with incomplete information and will just hop into the first taxi they see without fully understanding how the system works.

Or they just don't care, because their company is reimbursing it to them anyway.

In the UK, taxi rates are regionally regulated, with local councils dictating the maximum fare (per mile, per minute waiting in traffic, etc). I thought this was fairly common (in first-world countries).

As a tourist flying into Sweden, it wouldn't have occurred to me that the fare would be unregulated, and that I would need to exercise caution when choosing a licenced taxi.

Hey, free markets FTW!

So... we got so used to being coddled we can't do the smallest amount of due diligence (per a comment above, "will just hop into the first taxi they see").

Such a simple explanation, makes perfect sense.

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