Medallion Systems
In some large American cities, and in Hong Kong, a medallion system is used to license cabs. The city issues a fixed number of medallions, and only medallion taxis are allowed to pick up fares. In general, this leads to medallions becoming ever more expensive—a New York City corporate medallion can sell for up to $1 million each. Medallions are transferable, and while some cab drivers own their own medallion, most must lease one on a daily or weekly basis from a fleet owner.
The medallion system has several effects upon the illegal transportation market. By acting as a barrier to entry to the taxi market, it has the unintended consequence of creating a market for unlicensed cabs, especially in areas that tend to be underserved by medallion cabs. Taxi medallions tend to increase in value over time, and their owners and lessees tend to be very eager to protect their exclusive rights, for example, by lobbying for stricter enforcement against unlicensed cabs.
Read more about this topic: Illegal Taxicab Operation
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