Senior Research Fellow Payal Malik has co-authored an op-ed on surge pricing in the taxi market that addresses some key issues of platform markets. The distinguishing feature of platform markets is the lowering of transaction costs through the use of ICTs. State action to prohibit such applications is retrograde. Instead, what should be done is to remove no-longer-justifiable constraints such as rigid and limited issuance of licenses. The state fixes two parts of the taxi market.
In theory, surge pricing is a no-brainer. If prices go up when demand surges at particular times, surge pricing will bring additional supply to the market. While not supporting what appears on the face to be an economically illiterate decision by an Indian court to ban surge pricing the authors of the Economic Times op-ed point to an unnoticed Delhi-specific fact: the only drivers who can respond to the price signal are those outside the area, since only licensed drivers can supply services. This suggests that research that pays attention to the specific conditions is needed. This is what LIRNEasia did with regard to telecom reform; this is what is needed for platforms in developing countries.
The only platforms LIRNEasia is currently studying are those used for micro work in the IT and ITES sector. There our focus is on inclusion. But, this article shows we should consider looking at more platforms. Deepthi, the single mother of a teenager, says she has tried other types of self-employment. She worked as a goldsmith, nursing home careperson and, sometimes still makes shoes and bags at home.