Why won't she just take a taxi?

Three years ago my mother- and father-in-law decided to sell their car. They worked out that they would save enough on maintenance and insurance to pay for a taxi at least once a week.

In three years, how many times has my mother-in-law taken a taxi? Excluding trips to the airport or train station - journeys she made by taxi even in her car owning days - none. Zero. Zip. She walks or takes the bus to the grocery store or up the town.

My mother-in-law is a pharmaceutical company's worst nightmare - fit, healthy, and medication free. But I think she'd be happier if she took a taxi once in a while to go out in the evening with friends. And I don't understand: why won't she?

The economic approach to the question considers marginal costs and marginal benefits. A car involves high fixed costs, but low marginal costs. Using a taxi involves no fixed costs but high marginal costs. People will take trips as long as the marginal benefit of the trip is greater than or equal to the marginal cost. Car owners face low marginal costs, so take low marginal benefit trips, such as driving to the mall to buy a can of tuna. Taxi takers face high marginal costs, so won't undertake a journey unless the marginal benefit is high, such as taking a taxi to the mall to buy a week's groceries.

The economic approach explains why taxi users take fewer trips than car owners. But it's hard to explain why someone would take no trips at all by taxi. One study I found reported that just 1 percent of seniors in Britain regularly used taxis. Yes, taxis are expensive - but so are cars. The cost of insurance alone would pay for dozens of taxis.

I have a few totally unsubstantiated theories about why people don't take taxis more often, and some policy suggestions.

Unsubstantiated theory 1: habit/routine. If every time I sent to the grocery store, I gave profound consideration to every purchase decision, it would take me 2 hours to get around the store. People simplify their lives by using rules - I just grab the brands that I know, from experience, will satisfy my needs and are within my budget. Many people have lived life according to the rule "I can't afford to take taxis." It's hard to get accustomed to new routines.

Unsubstantiated theory 2: the fitness club problem. Why do fitness clubs sell memberships that provide for unlimited use? Going to the gym makes you feel good in the long run. But it hurts in the short run. Having to pay each time you go to the gym would just exacerbate the short run pain and make one even less likely to go. Taking a taxi has a similar dynamic - short run pain (the fare) for long run gain (freedom, connection with friends and family). Because we focus too much on the short run when making decisions, we don't take taxis, even if getting out would make us better off in the long-run.

Unsubstantiated theory 3: Taxis aren't set up to make old folks feel comfortable.

So what's the answer?

More flexibility in taxi pricing structures would help a lot.

One solution is to reduce the marginal cost of taking a taxi with off-peak fares, "season passes" that would allow seniors to pay a lump-sum for unlimited free or low-cost rides, or by encouraging drivers to make multiple pick-ups/drop-offs on a single route so two or three seniors could share a given fare.

An alternative is to take the pain out of paying the cost of a taxi, with pre-paid taxi vouchers, automatic credit card billing, and so on. Handing over five $20s for five different rides hurts more than a single $100 credit card charge.

It would be easier to make the decision to sell the car and take taxis instead if one could pre-commit to spending, say, $400 or $500 a year on alternative forms of transportation.

But comfort matters, too. In a taxi both passenger and driver are in a vulnerable situation, alone with someone they've never met before. There's numerous ways in which taxis could be made more comfortable for passengers:

- making it easier for passengers to get to know and to request a certain driver, especially when booking ahead of time. "You had Jamie last time, would you like the same driver again?"

- taxis that are easier to get into and out of - a Toyota matrix, rather than a low-slung vehicle.

Much of the policy debate seems to be focus on publicly providing or financing services to seniors, for example, through para-transpo. But that's a price solution (low cost transport) to an income problem (inability to afford to take a taxi).

And not all seniors are poor. Mrs A, living in multi-million dollar Vancouver home, doesn't need para transpo.

She just needs to get her act together and dial a taxi, so she can get out and enjoy life.

 

 

 

 

 

Comments

[Elisabeth Gugl]

I opt for theory 2 in the case of your mother-in-law. But I think theory 3 points to an important issue in how people choose transportation. My mother, who lives in Austria, won't take the train anymore because the train ticket has to be bought from a vending machine. She takes the bus, because the driver sells the bus ticket to her. So in my mother's case it's not even about comfortable transportation, but some people are afraid of using new technologies to buy the tickets.

[scott]

Great post! I lived in Vancouver and faced a similar dilemma... I calculated that given how little I used my car, it would be cheaper to take taxi than to pay $100/mo for insurance and $200/mo for parking. I sold my car, and resolved to take taxis everywhere (and rent a car for the occasional longer trip). As with Mrs A, my good intentions didn't pan out, and I rarely took a taxi.

Several months later, my experiment clearly wasn't working. The reason, I concluded, had to do with sunk costs versus marginal costs and my expectation of travel costs; a taxi always felt like a frivolous use of money. I was studying decision theory at the time, and "taxi" was clearly not a subgame perfect choice.

I needed to add credibility to my choice, so I gave myself a taxi budget of $50/week with the caveat that I had to spend it otherwise I would buy a car again. This worked very well. I took plenty of taxis, sometimes for only a few blocks, or for very silly reasons, like to catch a bus that I had just missed. I probably taxied more often than I used to drive, and always stayed within my $50/week budget.

Eventually, I started to think that if all the drivers around me payed the full (not just marginal) cost of driving whenever they got in their car, then they might be more willing to try different modes of transit. The provincial insurance company had a proposal a while ago for pay-as-you-go insurance, based on info from a GPS and the time-of-day and location you were driving. I'm not sure what happened of it, but I wonder: would something like this change the dynamics of transportation choices?

Pre-paying for taxis (like cell phone minutes) sounds like a good idea.. pre-commiting is basically what worked for me. Maybe taxis would willing to take a small hit on meter rates for more reliable customers.

[yohanna]

Very interesting post! I've tried to explain the fixed vs marginal cost issue to friends and family since I went car-less, I'll now have better vocabulary to do so (I'n not an economist and "marginal cost" didn't come to me naturally until I started reading WCI). I would however take issue with the last bit - it doesn't look to me like an income issue, if habit or time horizon are key factors in the decisions.

Despite the reasoning behind my original decision - the money saved on the car, insurance etc can pay several cab rides per month - I never take cabs either, and came up with theory #2 to explain it. Having to fork money every time I want to go somewhere, rather than "maximizing" the value of my car payments by using it more often, has very much changed my transport habits - which was my goal.

You don't factor carshare schemes in your post. Perhaps they're not relevant to your in-laws' situation, but for many people in cities the availability of a carsharing service (eg Virtu Car in Ottawa or Communauto in Quebec) is key in the decision not to own a car. It also affects decisions to use a taxi, as they're often a cheaper alternative (my own calculation is that for most outings, carshare is half the price of the return taxi ride). In my case, the marginal cost of a taxi is weighted against the marginal cost of cycling, walking, asking friends a ride, using Communauto or renting a car at cheap weekend rates(and consolidating errands accordingly). Hence almost no taxis.

Communauto and probably other carsharing schemes have partnerships with taxi companies that include some of the solutions you suggest eg pre-paid vouchers or automatic monthly billing. I'm not aware that anyone has done much yet with the data being generated by Communauto members on car vs taxi use and so on, but it's probably only a matter of time.

Unless your in-laws went car-less because they no longer wanted to drive, increasing access to car-sharing would be another way of making it easier for them to get around. There's much provincial and municipal authorities can do to make this happen (and I'm not talking subsidies).

[Account Deleted]

Frances:

Yet another brilliant post! I'm probably repeating what has already been said in different words, but I suspect inertia is a large part of what's at work - Oblomovian behaviour as James Dean's old Harvard teacher, Harvey Leibenstein, used to call it.

Take myself as a case in point. I've made a point of walking to and from campus this semester, and just stop off at the little mall at Pretoria Bridge on the walk home to stock up on groceries and booze, just what I need for the next day or two. So I have hardly used my car at all this term.

I have been thinking I should sell it, or take it off insurance and garage it, or at the very least get rid of the expensive library garage parking I still needlessly pay for. But haven't done so, perhaps out of inertia, perhaps thinking it will come in handy in the winter term if it's bitterly cold and I don't feel like walking.

High taxi fares are probably also part of the problem. A cab fare from where I live downtown to Carleton costs about $20. So if you and go every weekday, that's $100 a week, and a car starts looking attractive. But I share the puzzlement of why someone who got rid of their car then doesn't take taxis more regularly.

[Just visiting from Macleans]

I was faced with a similar situation - a widower father who had grown up in the depression and served England during the Battle of Britain. Bottom line - he was frugal.

[Chris S]

This reminds me of a situation in my small Ontario hometown. For years we hard a choice of general delivery or, for a fee, a locked box. As the town has grown, this has put an increasing load on the small post office.

There was a suggestion that the town could go to residential delivery. But it was immediately noted - and reinforced - that many residents did NOT want home delivery. They much preferred to walk downtown for their mail.

Now, given that the cost to you of getting your mail isn't going to change when you get home delivery, nor is the cost to the senders going to change, what is it about post office delivery - traval time, possibly limited hours - that makes it more attractive?

The suggestion was that going to the post office was an enjoyable outing. You got to see what the town was up to, see the postings on the bulletin board, chat with the other customers at the post office -- in short, all kinds of things that weren't captured in the difference between postal outlet and home delivery comparisons.

There is a real-life complexity to this situation, and simplifying the analysis removes factors that many people care about. Try leaving in factors such as "quality of personal encounters" in your analysis and see if you get the same results.

I suspect that the taxi decision may also be encountering this. When you ride the bus, there is the chance that you may strike up a conversation with others. By comparison, the taxi ride can be lonely. Sure, there's a chance of a conversation with the driver, but you can't pick your driver. Depending on who you get, you may have to suffer in silence.

The other factor is more in tune with a traditional analysis - ride quality. In many cases, the quality of the taxi ride is not as much better as the premium paid. The cleaning fluid for the seats stinks, the shocks are poorly maintained - in short, it's not at all like riding in your own car. In fact, it's not all that much better a ride than the bus, and possibly worse. It's just faster.

And finally - and very classic - what is the opportunity cost associated witht the time saved via taxi? Suppose the bus trip takes 100 minutes and the taxi trip takes 30 minutes. How valuable is the saved 70 minutes? If the value of that time is low, then why would you spend (expensive) money to save (inexpensive) time?

[Frances Woolley]

Great comments (so much so that I don't have much to add).

On Virtucar and rentals - yes, car sharing arrangements make a lot of sense. The rental car market is definitely reaching out to non-car owners with weekend specials, discounts for frequent renters, cars that are pleasant to ride in etc, which makes me wonder if perhaps part of the issue stems from the regulation of the taxi industry.

Which comes back to the point raised by Vivek - in some places, like Ottawa, taxis are really pretty expensive ($20 for a 15 minute drive) and, as Chris S says, not very pleasant. Given that running a taxi involves non-trivial fixed costs (licence, car, etc), the marginal cost of a taxi ride is less than the average cost. So it would make sense for taxi drivers to match revenues with costs by having a lump sum fee + low cost per ride pricing structures e.g. $100 per month to join the Taxi Club then $10 per ride. There's a whole other post that could be written on the political economy/regulation of taxi companies.

[Alex Plante]

Some people just have bugaboos. For example, I hate ordering food out, or even ordering at a drive-through - I have to go into the place and order in person, then bring it to wherever I eat it.

[westslope]

Don't we adopt fast rules, i.e., no taxi, because we fear indulging too much, i.e, taking too many taxis.

FW: It is your mother-in-law! And it is Vancouver. So why not just buy her a commuter bike and be done with it? She owns gore-tex, no?

[David]

Interesting post. If the taxi company executives are reading this they'd be smart to take some of your advice.

[Frances Woolley]

Just to clarify - Mrs A and my mother-in-law are two different people.

[Neil]

Definitely about marginal costs for most people. I know many car-free families, and while most use taxis sometimes (non at all is a little nuts), it's definitely a harder decision than taking the car to run a few errands.

Re: taxi regulation. I don't really understand the insane amount of regulation surrounding taxis. It seems like it gives us the worst of all worlds. I think the most reasonable thing I've ever seen was in Bucharest, where the meters are accurate (presumably checked similar to the way Measurement Canada checks gas pumps and grocery scales), but prices are set by the individual driver and posted on the door. If you live there, presumably you've got your driver that you call that meets the right balance between promptness, professionalism, comfort and price. If you don't, you just eyeball it when you're flagging someone down. There's ratty old Dacias for really cheap or brand new Mercedes for much more. Wabush, Labrador was also interesting, where you could go anywhere in "town" (Wabush or Lab City) for $5. I doubt it was regulated, most likely just collusion between the two drivers.

[tomslee]

I love the "season pass" idea. Why does no one do this?

"just 1 percent of seniors in Britain regularly used taxis" - probably because seniors in Britain get free bus travel.

[tomslee]

The same problems must affect car-sharing schemes (eg zipcar). Yet how could they overcome it without inviting a free-rider (sic) problem? Maybe some limited number of free hours once the monthly subscription is paid?

[tomslee]

Chris S. I came across a case of "collecting mail is an outing" recently. A friend and her sister set up online payments for their aging mother's bills in an Eastern European country, because going into town to pay them is a whole-day outing. Best of intentions, but their mother hates it. She didn't see the outing as a burden, but as an event.

Three comments in a row - I'll shut up now.

[Frances Woolley]

Tomslee, on the free bus travel, yes, that's definitely part of my mother-in-law's aversion to taxi-taking. Here in Ottawa, with a bus costing almost $3 per ride (cash fare) and a taxi from my place to downtown costing about $12, with four passengers a taxi is as cheap as a bus. On car sharing - I think there is a marginal cost per use as well as a subscription fee, at least with the Ottawa scheme.

Neil, this is what I love about blogging - how else could I have learned fascinating trivia about Bucharest taxis?

[Mark Fryars]

I think option 2 could work well; with a a cleverly managed pricing structure. and a loyalty points systems as well (e.g. one free ride when you trip $100. When will you start working for Blue Line?

[Rachel]

In Vancouver we have a program called Taxi Saver. It is for people who have barriers to using transit on their own, often people with physical or intellectual disabilities. First you qualify for the program and are issued a Taxi Saver card. Then you can obtain special money. For every dollar you pay you are given two "fare saver" dollars. All taxis are required to accept these dollars and the taxi companies trade them in for regular dollars from the transit company which runs the program. My son has the card to qualify for the program but we have never used it. He loves to take the buses and skytrain and would consider a taxi a poor substitute.

[Frances Woolley]

Rachel, fascinating, thanks. I wonder if this could be a model for services for seniors?

[scott]

One of the more curious Canadian taxi arrangements is in Iqualuit. It costs $6 to go anywhere in the city, however the taxi driver is free to pick up other fares en route to your destination (not uncommon in small cities). If you don't have a car (or snowmobile) the taxi is your only mode of transport.. There used to be a bus service, which charged $2/person, but it cost $17/person to operate the bus. City council cancelled the bus after two years, with one official saying they could have bought everyone a taxi voucher and had $100,000 left over.

[reason]

""season passes" that would allow seniors to pay a lump-sum for unlimited free or low-cost rides,"

Great idea,
- but the problem is of course that taxi's are idependent and only getting one firm all the time is a hassle. But I'm all for paying for more things pauschal. Costant marginal cost calculations are a hassle. Transaction costs are not insignificant.

But it is true, I have thought about the same sort of things. One of my pet puzzles is why people buy caravans. (Lets ignore fit retirees - for whom it may make sense - for the moment). It can't possibly be cheaper than paying for hotels - particularly if you add the extra costs for a bigger car, extra petrol and the annoyance of being much slower and finding it harder to park. So why do people buy them?

[yohanna]

Car-sharing price structures are somewhat different in each market, but do seem to share a yearly/monthly flat rate + pay-per-use (which combines time and distance). No free-riding there...

For instance, the Quebec system charges $500 (refundable) to join, $35/year in membership (basic plan), then $2.00/hour + $0.28/km. All prices include gas, insurance, car maintenance, and they're the same in Gatineau, Montreal, Quebec and Sherbrooke (which means Gatineau users subsidize the others, as gas is cheaper here). The time/distance rate is cheaper for those to pay a higher yearly membership. There's a different rate structure for very long distances, flat $25/day + $0.08/km.

Ottawa is much, much more expensive, something like $25/month in membership plus a similar hour/distance rate. The cost of car insurance can explain some of the difference, since it's much higher in Ontario. I cannot think of any other factor that differ so much - parking rates are presumably similar in Ottawa and Montreal, gas is about the same or cheaper in Ontario, cars should cost about the same (they tend to be similar models).

I've been wondering how those pricing structures might affect use. At $35/year in Gatineau, my fixed costs are nothing, and marginal costs are all I care about (making my bike very competitive, whereas the bus doesn't stand a chance given its price and inconvenience). At $25/month in Ottawa, the fixed vs marginal costs calculation would be quite different.

I like the idea of a taxi pass, but in the Ottawa-Gatineau downtown area it's a non-starter...

[Frances Woolley]

Yohanna, interesting, it sounds as if your calculations and mine are almost identical. As a one car/four person household, we've thought about subscribing to the Virtu-car car-sharing service for a second car when needed, but at $25 per month it's cheaper to rent/borrow from friends - we probably would subscribe for $35/year. Perhaps the cars aren't used as much in Ottawa making for higher per user costs, or perhaps there are some special subsidies for the program in Quebec?

On taxi-passes - whenever I go to the train station or airport I see long lines of taxis. With this number of empty taxis, I just don't see how there can't be some scope for making money by identifying some group of users and charging them a relatively low marginal cost for rides at a time when the taxis would otherwise be empty. I think Ottawa has got itself into a vicious circle whereby high fares imply low usage imply low revenues for drivers imply yet higher fares.

And the current structure with high fares/low number of taxi licenses means that it costs tens of thousands of dollars to buy a taxi license which in turn necessitates high fares on an on-going basis so that taxis can pay back their license fee!

[Wendy]

Somehow I think taxi supply/demand is out of whack in Canadian cities, and it may be because the licensing costs are high.

When I lived for 6 months in Mexico City (long time ago), I took cabs all the time; even on a US-grad-student salary they were affordable (about $1 - $3 / ride). I'd usually take the metro as close as it would get me to my destination, and if it was too far to walk (or I was in a hurry) I'd jump in a cab. There was almost always a cab nearby when I needed one. Supply and demand seemed aligned.

In Vancouver, even when I call a cab, it often takes 10 plus minutes to arrive, and I live 5 blocks from a taxi office/station/hub. Trying to get one even downtown by hailing is next to impossible, you need to walk to the nearest major hotel. Plus, it's expensive; it's cheaper to pay downtown parking than take a cab 3km from my house (or pay airport parking in many cases!)

Supply-demand not in sync. If they were in sync, perhaps people would take them more, as there might be more supply at a lower cost. Perhaps these 'advanced purchase' or 'off peak travel' ideas might help both the industry and potential riders. But that's Vancouver.

When I'm visiting Toronto, there always seems to be lots of cabs, but it's expensive and the drivers have no clue where anything is (unless it's simple like between downtown and the airport). Not really an incentive to take one.

[D]

Wendy,

Vancouver has some sort of quasi-monopoly given out to specific firms. It makes the actual use of cabs extremely painful.