A macroscopic taxi model for passenger demand, taxi utilization and level of services

In most urban areas taxi services are subject to various types of regulation such as entry restriction and price control. However, effective intervention depends on generating and using suitable information on the demand-supply equilibrium of the taxi market. This paper develops a simultaneous equation system of passenger demand, taxi utilization and level of services based on a taxi service situation found in the urban area of Hong Kong over the last ten years. A set of variables is introduced including number of licensed taxis, taxi fare, disposable income, occupied taxi journey time as exogenous variables and daily taxi passenger demand, passenger waiting time, taxi availability, taxi utilization and average taxi waiting time as endogenous variables. These variables are coupled together through a system of nonlinear simultaneous equations whose parameters are estimated from survey data. The simultaneous equation system can be used to obtain useful regulatory information to assist with the decisions concerning the restriction over the number of taxi licenses and the fixing of the taxi fare structure as well as a range of service quality control.