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Uber in Hong Kong: A Regulator’s Dilemma

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In Hong Kong as elsewhere in the world, Uber operates in a grey area. Thousands of passengers are using Uber service in the crowded city on a regular basis; many drivers make money through Uber by providing quality service and idle vehicles. On the other hand, taxi drivers have voiced strong oppositions to Uber on the ground of unfair competition and unlawful businesses, and staged several protests that were widely reported. Officially, Uber service is illegal in Hong Kong, as the government clarified explicitly that Uber drivers broke the law by offering car hiring services without any license or third-party insurance. The public is often puzzled: Uber seems such a nice thing that benefits both passengers and drivers, especially because the traditional taxies have such a poor quality and are often unavailable during peak hours. Why shouldn’t we allow a healthy competition from a new and promising business model that seems to benefit everybody except the competitors? Isn’t competition a good thing in general? So the question is, should the government allow Uber to operate legally?

This case enables the instructor to go through the uniqueness of the taxi industry and the necessity to regulate the traditional taxi industry. The case provides evidence of what will happen if the industry is deregulated. Once the uniqueness of the industry is illuminated, the instructor can guide the students to discuss whether Uber’s new business model is able to overcome the two major problems of the traditional taxi industry: adverse selection and tragedy of the commons.

This case can be used for courses that cover public policy at both MBA and the UG levels. It can also be used for an economics course. Finally, the case can be used to discuss the new business models..

Learning Objective:

  • To discuss the uniqueness of the traditional taxi industry, and the causes and consequences of market failure

  • To understand why and how the traditional taxi industry is regulated, and the consequences of regulation

  • To introduce Uber’s business model and its future, especially in view of competition with other ride-hailing networks

  • To explore whether Uber should be allowed to operate and, if so, whether and how its service should be regulated

  • To discuss how the introduction of Uber will affect relevant parties including taxi drivers, taxi license holders, and society (congestion, pollution, etc.)

Year of Publication: 2019
Ref. No.: 18/605C
Discipline: Economics & Business Policy, Public Policy and Strategy
Industry: Transportation
Country: Hong Kong SAR
Languages: English
Pages of Text: 13