Air conditioned taxis in Mumbai cost twice as much as non-AC cabs. Why?
Let’s think about it.
AC cabs are newer vehicles than non-AC cabs, in general. But beyond that, they’re basically the same – kinda small, driven maniacally, etc.
Therefore, the demand for AC is such that the market clears at approximately 2x the price of non-AC. What else could explain it?
1. Strong demand among wealthy cab-riders who don’t want the pollution or the heat from keeping the windows down.
2. Relative scarcity of AC cabs vs. non-AC cabs.
I think both (1) and (2), taken together, explain the market for AC vs. non-AC to the best of my ability.
But on a personal level, I have a problem paying for AC cabs – it’s the same ride and I’m simply not willing to pay twice as much for the cool comfort.
So, two questions:
1. Why – beyond simple demand and supply – do you think AC cabs are twice as expensive as non-AC ones?
2. What multiplier (1.0x, 1.3x, 1.7x, 2.0x, 2.5x, etc.) are you be willing to pay for a AC vs. non-AC cab?