The Economics of Taxis
One difference between life in Malaysia one year ago and life in Malaysia today is with regards to taxis. Since we’ve arrived, we’ve noticed a big change in negotiations with taxi drivers. It used to be that in Kuala Lumpur, if you flagged down a cab, the driver would *almost* always take you where you wanted to go, and use the meter. There was an exception for the really touristy area of KL known as Bukit Bintang or in front of the Petronas Towers, but besides that, the driver would take you and use the meter, no questions asked.
That is not the case now. Now, almost everywhere that we go after around 3PM or with the exception of when we get cabs actually at our hotel, taxi drivers refuse to use their meters. Instead, they insist on negotiating some absurd price–often about four or five times the metered fare–for the trip. This is a real problem. You can often negotiate the price down to about twice the metered fare, but besides that, the drivers refuse to budge.
We cannot figure this one out. In essence, this has produced an annoying feature of KL life that all over the city, their are cab drivers sitting around with no passengers, just hanging out at taxi stands and refusing to take people who don’t pay inflated prices. The reason that this doesn’t make sense is that they are not making any money by just sitting around. Taxis in KL operate on concessionary bases, like in New York, where they have to pay a fee for the right to use the cab and then they make any take-home pay after that cost. So by sitting around at taxi stands and refusing to take passengers, or driving around, pulling over, and then refusing to pick you up, they are shooting themselves in the foot.
There are two things that explain why there could be a difference between now and a year ago. (1) Government-mandated gasoline prices have risen, but government-mandated metered taxi fares have not. (2) Downtown KL is experiencing a construction boom that creates more traffic. But neither of these can explain why cabbies would be willing to forgo all income by offering absurd prices that price passengers out of the market. Remember, KL does have pretty good mass transit, so people have options even if they would prefer to take a taxi. And we know that the market isn’t clearing because there is a surplus
of cab drivers waiting around and doing nothing as well as a surplus of
passengers complaining that cabs are too expensive and therefore taking
the subway even though they would prefer to take a cab. Furthermore, Indonesia and Singapore have experienced the same construction booms, gas price rises, and steady taxi prices, yet in both countries, taxi drivers will pick you up and use the meter, no problem.
Any Malaysian readers who can explain this to us?