Rainy Night Taxi Blues

Ever wonder why it’s so difficult to catch a cab on a rainy evening?  Common sense suggests the reason is that people prefer riding to walking when it’s raining.  Given a fixed supply, cabs are less likely to be available since more people want them.

While this explanation seems obvious, economic theory suggests otherwise.  As background, most cab drivers are independent contractors who pay a fixed fee to a taxi company to use a cab for up to 12 hours. The drivers keep all the fares they collect and can return the car at any time before the 12 hours are up.  If the drivers were following the law of supply and demand, they would work the maximum possible hours when it rained because it would be easier to get fares.  Therefore, there should be more cabs on the road when it rains, balancing out the more people who want cabs.  Economic theory doesn’t explain why cabs are hard to find in the rain.

Research provides an alternative explanation called “daily income targeting.”  Taxi drivers report that they decide how long to work each day by setting an income target for the day. As soon as they reach that target, they return the cab.

For example, a cabbie might want to earn $150 more than the fixed fee he has to pay to the taxi company.  If he makes $25 per hour (as he might when it rains), he only need to drive 6 hours.  On slower days, he might earn $15 per hour and have to drive 10 hours. As such, income targeting counterintuitively predicts that cabbies will drive less hours on good days.

So, if you’re trying to catch a cab on a rainy day, you’ll probably be fine – most drivers won’t have yet reached their income target for the day.  But if it’s after dinner, expect to wait longer.  Not because more people want cabs but because more cabbies have decided to go home.

And, if you’re a cab driver who reads this blog, you can make more money if you work a full shift when it rains.  I’d appreciate the ride.

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8 Responses to Rainy Night Taxi Blues

  1. Ricarda Rodatus April 6, 2011 at 9:41 am #

    There is often another reason behind the most obvious reason. This story teaches you to not accept the 1st thought, to dig deeper, and to go out asking the victim AND the suspect. I will always remember this lesson when standing after (or worse before) a nice dinner in SF in the rain waiting for a taxi to drive by (which indeed rarely happens during those evenings).

  2. Robert E April 8, 2011 at 7:30 am #

    You don’t add that a cab driver is also accountable for the condition of the cab, meaning any damage to the vehicle-the cabby is responsible.
    Since more fender-benders are likely to occur during bad weather, it might be more advantageous for a cabby to take a slight loss on the evening’s revenue rather than risk damage to the vehicle.

  3. Madhur A April 13, 2011 at 12:46 pm #

    Very fascinating and an alternate view to human behavior.
    That said, I am not sure I totally agree with the research findings. I happen to live around the city researcher (Colin Camerer) bases his study on and had a hunch that supply-demand still rules when it comes to hailing cabs. I decided to do a little research project to test out my hypothesis. Fortunately, the rain gods have been kind and we have had a few rainy days over the last couple of weeks. Every time I got in a cab I made it a point to ask the cab driver why it is difficult to find cabs on a rainy day. Turns out most cab drivers rent by the week and mentioned that one good day does not stop them because they know a bad day may be around the corner (to be accurate I live in Jersey City which is across from NYC but still may be different than NYC when it comes to renting period.) In this case it was excess demand that caused the imbalance. On the flip side, demand constraint is the primary reason why it is very difficult to find a cab around 4pm in NYC – 4pm happens to be the cut-off for shift change of cabs in NYC. Just make sure you are not trying to hail a cab in NYC around 4pm on a rainy day.
    But all of this also got me thinking about the effect of “targeting” on human behavior. Is the underlying issue that
    1. Most people do not set aggressive enough goals so that they have put in their 100% to achieve it or
    2. People who do a great job with relative calm convey the impression that goals were easy to achieve or
    3. Targets really create artificial barriers and force sub-optimal performance

  4. Stella April 13, 2011 at 5:13 pm #

    Interesting post! Sounds like oftentimes, it’s more likely a combination of the three factors that leads to a rarity of cabs on the streets on rainy days. If I were a cabdriver, I think I would be taking advantage of the opportunity for a little more cash.

  5. Ashish Rawal May 3, 2011 at 8:59 pm #

    beyond the obvious, lesson learnt.

  6. Staggerlee May 16, 2011 at 8:55 pm #

    Let me begin by saying that I drove a cab (night shift) in Toronto for nearly 10 years. I now work in a University–a sea of academics, long on ‘theories’ and short on common sense (generally speaking, of course). The ‘daily income targeting theory’ about finding a cab on a rainy nights is a great example of theoretical nonsense.

    The answer lies squarely in supply and demand theory. The supply of taxicabs is (with few exceptions) strictly regulated by local taxi commissions. On any given weekday between the hours of, say, 7:00am and midnight, nearly all cabs are on the road (except for those undergoing maintenance and repairs). When it’s rainy (or freezing cold), the demand for cabs from people out-and-about goes up. (Note, however, that rain and cold can actually reduce demand since it can discourage people from going out on weekday evenings.) When supply is fixed and demand goes up, it’s harder to get a cab. So what about those other times (weeknights from midnight to 7:00am, or Sundays)? Well, except for certain demand spikes (say, when bars close), demand declines steadily as the night wears on. For the most part, there’s not enough happening in Toronto at least) between about 3:00am and shift-change at 4:00 (or 4:30)am to justify spending the time and gas to stay out. Most drivers knock off when business drops off. But if business is hopping (such as Halloween, during the Christmas season or on New Years eve), most drivers try to cash in. Toss in some freezing rain and no driver I know would pack it in early because he met his ‘income target’. Believe me, there were many nights (especially in the heat of the summer) when I had little to show for my time (after paying for gas and the shift).

    So whoever came up with the ‘counter-intuitive’ ‘income target’ theory, you really need to get out more. And next time you’re in a taxicab, try engaging the driver in a conversation about the life of a cabbie. You will learn something (and the driver will appreciate your interest).

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