Airport taxi service regulation: An analysis of an exclusive contract

Taxi service at a number of major airports is supplied by one taxi company under an exclusive contract with the airport operating authority. Conventional wisdom suggests that airport taxi service produced under exclusive contract is socially inefficient. This was found to be true at the Dallas/Fort Worth Airport. In this paper we analyze the exclusive airport taxi service at Honolulu International Airport as a case study. At Honolulu International Airport, the terms of the exclusive airport taxi service contract are far less restrictive than those at Dallas/Fort Worth. Our analysis indicates that exclusive airport service can provide high quality service, reasonable prices and revenues to finance airport service. We conclude that is not the exclusivity, but rather the terms of the contract and the circumstances specific to each market that determines which system is best for a particular place.