Hi all,
how would you go with "what's the cost of a taxi driver license in Milan?"
Suppose that the cost is one-shot (not yearly) and that is not supposed to cover any organizational cost, just a fee that every driver has to pay once to start his activity.
Thanks,
Lorenzo
Hi Lorenzo,
the approach depends a bit on the angle through which the question is asked.
If it is about "how should a taxi license be priced", then a very logical approach would be to estimate the willingness to pay (WTP) of a taxi driver. In short, this WTP is equal to the value which a person can generate with taxi driving of a focal time frame (here I would assume several years, but check with interviewer) minus the value of his best alternative income source over the same time frame (to be inquired with interviewer (might also be zero)).
So in essence, you need to estimate the profits for the taxi driver and subtract the best alternative income. This will give you the maximum price that can be sustained in this market.
Cheers, Sidi
Thank you Sidi, glad that I used a similar approach: I calculated the profit of a taxi driver and supposed that the cost of the license (not an yearly cost) could be compared to an investment with a certain payback period (I supposed 3 years), no best alternatives. I think the approach is pretty similar, isn't it?