Question

individual taxis in new york, chicago, and many other cities must have permits, but there are only a fixed number of permits. the permits are typically sold in the marketplace. who benefits from such a regulation?

Answer 1

Taxi permit regulations in cities like New York and Chicago benefit current permit holders due to the created scarcity and potential permit value increase. The Governments benefit from sales or auctions of permits. They could also potentially benefit the public by reducing congestion and pollution.

Step-by-step explanation:

The regulation that requires individual taxis in cities like New York and Chicago to have permits, where there is only a fixed number of permits, benefits several groups. Primarily, the current permit holders benefit because the fixed number of permits creates scarcity, driving up the value of the permits in the marketplace.

These holders can sell their permits at higher prices if demand for taxi services increases. The government or regulatory body that issues the permits also benefits from the initial sale or auction of these permits.

Moreover, theoretically, if the permits are expensive enough, this could limit the number of taxis and reduce congestion and associated pollution, benefiting the public by maintaining a manageable level of traffic and potentially better air quality. However, this can also lead to a decrease in competition, which might result in higher fares and fewer choices for consumers.