Market Coordination in the Age of Digital Platforms: The Case of the Taxi Market in Warsaw

Friday, June 24, 2016: 10:45 AM-12:15 PM
205 South Hall (South Hall)
Marcin Serafin, Max Planck Institute for the Study of Societies, Cologne, Germany
Taxi markets provide an excellent case to study the impact of digital platforms on market coordination. Over the last few years digital platforms such as Uber, Lyft, Hailo, mytaxi, and iTaxi have been shaking up the taxi industry. In this article I take a closer look at this phenomenon by analyzing the case of the Warsaw taxi market. Drawing on the ongoing research on the Warsaw taxi market that started in 2012 and consists of interviews, survey, observation, and a historical analysis, I investigate the impact that digital platforms have on the Warsaw taxi market taking as a vantage point for the discussion of three coordination problems: (1) competition, (2) cooperation, and (3) valuation (see Beckert 2009).

(1)   Firstly, I investigate the impact of digital platforms on competition. I show that while the first digital platforms, iTaxi and mytaxi, which were introduced in Warsaw in 2011, challenged the model of the taxi corporation that emerged in Warsaw out of the post-socialist transformation, they did not challenge the existing licence system. Forced to find drivers for their applications, iTaxi and mytaxi have aligned themselves with licenced taxi drivers and some of the smaller taxi corporations by using only licenced drivers. However, the more recent arrival of Uber in 2014 has challenged both the current model of taxi corporations and the existing regulatory regime, as Uber has been bypassing city regulations and using non-licenced drivers. At the same time the introduction of Uber coupled with new mnemonic devices such (GPS systems) has been undercutting taxi drivers’ claims of expert knowledge, which provided justification for current regulation.

(2)   Secondly, I investigate how the introduction of digital platforms has impacted the cooperation between the two sides of the taxi market: taxi drivers and their fares. One of the central problems of any market is that two sides have to find each other. In taxi markets this problem of connecting supply and demand is particularly difficult because, unlike in many other markets, both sides are on the move and in a hurry. A taxi market is not like a bazaar market where the locality of the vendors is fixed, nor is it a market where the locality of the customer is fixed. This coordination was once achieved through the institution of the taxi stand and later with dispatch centres of taxi corporations and the work of taxi dispatchers. Digital platforms have transformed this coordination as they help actors locate each other in time-space. They do so by providing market participants with cognitive artefacts (Hutchins 1995), which take the form of instruments of observations and measurement (Pomian 1998). These cognitive artefacts transform what the sociologist Ervin Goffman called the “interaction order” by extending the “response presence” of different market participants (Goffman 1988), reshaping in the process market structures (e.g. making the work of taxi dispatchers no longer necessary and transforming the power relations between taxi drivers and taxi corporations). Currently the members of the taxi ecology, although physically far away, are nevertheless in each other’s “response presence” as they are able to see and hear each other over distance. I argue that instruments of observation are at the same time an empowering tool that enables taxi drivers to make better decisions, but also a source of control over them for taxi corporations and customers.

Instruments of observation and measurement reshape relations between taxi drivers and their fares by transforming the informational order of the market. Traditionally, one of the characteristic features of the taxi market has been a lack of knowledge and an asymmetry of information. In the taxi market the two sides knew very little about each other as they often have never met before and were not likely to meet again. The history of previous  exchanges was only stored in the memories of the participants of those interactions. I focus on how digital platforms have created a form of “objectified memory” that is encoding the information of previous interactions based on classifications made by different market participants. These classifications of previous interactions then structure future interactions. 

(3)   Thirdly, I look at the impact of digital platforms on valuation of the service provided by taxi drivers. The introduction of digital platforms has challenged the pricing system. Like many taxis around the world, the price of taxis in Warsaw is regulated by the municipality, which introduces a maximum fee for the service. Historically the prices for taxis have been institutionalized and emerged out of political struggles, which involved taxi drivers, taxi corporations, the city municipality and courts. While the introduction of the first digital platforms did not change this situation, Uber policy of “surge pricing” has. The introduction of this new pricing mechanism based on a computer algorithm has challenged the moral economy of both taxi drivers and their customers as different market actors have criticized the fairness of this new pricing system. Licenced taxi drivers have complained that these new prices are not fair as they undercut competition, while customers have complained about the fairness of having to pay more in times of need.