edit To clarify, I'm not saying there are no problems with the current cab systems, only that public safety and consistent fares are one of the main reasons cabs are regulated by the government
1. The taxi driver refused to turn on his meter and then just demanded a fee.
2. Taxis refusing to take you where you want to go, i.e. getting a cab to brooklyn.
3. Taxis not showing up when they've been reserved ahead of time, early morning airport runs.
4. Taxis taking long and wrong routes to drive up the fare.
5. Taxis not knowing the area, and not having a GPS, so they get lost and then just give up leaving you somewhere.
6. Being in a taxi where the license picture does match the driver.
So, I've had lots of bad experiences of "regulated" taxis. I've had lots of good experiences too. As for unregulated, I've been in a few in south and central america, not sure if they were regulated or not.
Get into an unregulated taxi, and you're at their mercy.
The fact that some people might accept the service-failures listed by the GP as not being bad just shows how low expectations to taxies has become. Luckily some people believe taxies can do better.
Finally, all but the stauchest libertarians would accept a sensible minimum of regulation that would provide a minimum of protection, including mandatory insurance and conspicuous display of photo ID inside the vehicle.
I have been ripped off by licensed ones, though - twice, I think. Both cases involved foreign counties and drivers who conveniently and suddenly lost their command of English.
Any demonstration in the vein you propose will rely on a measure of caveat emptor. I would guess I am willing to accept a greater degree of this (trading strict consumer protection for better competition leading to better service and lower prices) than you seem to be.
I’ve always been to flustered to get a medallion number when things are going south. And I always figured that it didn’t matter anyhow.
2) Report the company to the local taxi licensing commission. After a few complaints, they lose their license/medallion. One caveat: taxis at the end of a shift are allowed to pick their destination. If the taxi isn't at the end of the shift, let the local bouncer/valet know and that taxi won't be allowed back.
3) See #2.
4) See #2.
5) See #2.
6) See #2. Also, call the police because you are probably not in a licensed taxi.
And it sounds like your pitfalls are already illegal.
Looking to the future, things like smartphones and Google Glass will lessen the need for consumer protection by making user-reviews always at-hand. If you look at a taxi and see "Two stars, poor service" automatically overlaid, or if you get a list of rated companies when you try to call a cab, the market will be able to weed out bad eggs. This is a far more democratic solution than legislation.