Competition intensity among car-hailing platforms in Japan

Abstract

With the rapid growth of the car-hailing platform (CHPF) industry in Japan, regulators face the challenge of effectively managing competition to prevent market saturation or insufficient platform availability. A clear understanding of the current competition intensity is essential for this task. This study addresses this need by providing an overview of the institutional and operational characteristics of CHPFs in Japan, followed by an empirical analysis of their competition intensity. The analysis measures the competition intensity through the entry threshold, which is the minimum market size required for CHPF entry. The entry threshold is determined by the minimum size of a taxi service zone required for CHPF entry, which is defined as the total number of taxis and rideshare vehicles operating within the zone. The empirical analysis quantifies the increase in the entry threshold with the number of CHPFs, showing that the required market size per CHPF is approximately 1.8 times larger in duopoly markets than in monopoly markets. Our findings have significant implications for the development of strategies aimed at preventing the abuse of market dominance and enhancing the effectiveness of CHPF promotion policies.