Why Does Airport Pickup Cost More?

(Photo: Alquiler de Coches)

(Photo: Alquiler de Coches)

We are arranging a car to take us from our flat to Heathrow Airport early Saturday morning, then return us on Monday evening.  The price going to the airport is ₤28, the price returning is ₤38.  Why the difference?

One possibility is cost-based price discrimination: the driver may have to wait at Heathrow, since the plane and retrieving our baggage may be delayed.  Another is that the prices are set to match the differential set by metered taxis to reflect waiting time for fares at Heathrow (although I would think that competition among car services would eliminate that differential).  I don’t see how this differential could arise from demand-based price discrimination; and neither of the other explanations seems very satisfying.

(HT: DA)


RSaylors

Because you didn't negotiate a better price. Seems like this post is build on cognitive dissonance regarding a bad fiscal move on the part of an economist: which thus must mean the situation is a paradox/problem of some sort. I say this because DA is bright and the answer is not hidden from a simple behavioral-economic analysis:

Why did they TRY to charge you more? Because you have a plethora of choices in the phone book and an emense amount of time when it comes to getting to the air port, and you have a much smaller selection of transportation options when leaving. This means that the market clearing equilibrium is increased by the artificially low supply of cabs perceived by those at the actual air port. This is because a typical economic maximization search pattern for going TO the air port is to carefully compare prices between companies, but the typical pattern leaving the air port is to go with the 'standard rate'. Because that's the market clearing equilibrium at the air-port, even the taxi you set up ahead of time tries to charge that rate.

Why do we behave in this economically non-rational way despite living in a world where you can use your smart-phone to compare prices? For the same reason you didn't negotiate a better price in the first place: people are lazy and the marginal utility of avoiding a 'hassle' is way higher than 10 quid.

Regarding fees: Since there is profit being made well in excess of the taxation levied at the air-port and the airport tax does not change actual supply of taxies in a city, the added fee would have to be absorbed by the taxi company instead of the customer if there were not some other explanation for the above-usual market price.

Regarding customer availability: There's an assumption in this argument, that the fee TO the air port is actually LOWER than the typical fee because of increased customers. If the fee from bob's house to jim's house (the same distance as from bob's house to the air port) is usually the 28 pound sterling, then we know that such is the price they are willing to conduct the taxi-ing service at usually. No, as long as there isn't a special "going to the air-port" discount, the added customers at the air-port is some part of the marginal utility of driving to the air port that is not accounted for in the price but absorbed by the taxi-service.

Read more...

Frank P

When you're dropped off, the driver doesn't have to incur the cost of parking.

When the driver has to wait for you for pick-up, parking comes into play.

Manabu

Isn't it just that there are lots more drivers who want to go to the airport while a lot less who are willing to go anywhere else ? A driver can never forget how to get to Heathrow while one can easily get lost in a city ?

Mark

Uber

acidtest

isn't it an incentive to make sure there are always taxis available at the airport in sufficient numbers for the travelers that comes in waves ?

George S

In DC the airport commission charges taxis to get in line about 8.00 it cheaper to grab a cab at the drop off but they can get fined.

Buzz

Often (usually?) taxi fare structures (and other transportation fare structures) are established via government ordinance or regulation, which often (usually?) do not reflect market conditions perfectly (or even well?). Some jurisdictions, probably rationally, charge waiting fees at airports and other high-volume loading sites to reflect congestion costs. Airport lanes are precious.

yasha

I think you need to price the reverse trip (airport -> flat on Saturday, flat -> airport on Monday). A car service is more likely to be used by businessmen, who are also not likely to be in town on a Saturday (so lower demand). Plus there may be weekday surcharges for any trip that begins or ends in the city.

Francesco L.

To the airport: the cab pick up the passenger, drop off the passenger at the airport and the empty cab returns back to square one.
Returning home: the cab goes empty to the airport, waits for the passenger (whatevere the reason, the waiting can last longer than expected for delays, for instance), and returns with the passenger .
The return leg takes longer, so it costs more.

Eric R

"To the airport: the cab pick up the passenger, drop off the passenger at the airport and the empty cab returns back to square one.

Returning home: the cab goes empty to the airport, waits for the passenger (whatevere the reason, the waiting can last longer than expected for delays, for instance), and returns with the passenger .
The return leg takes longer, so it costs more."

Or they go to the airport with a fare and get in line for the large number of people at the taxi stand looking to leave the airport?

Andreas Moser

Heathrow is connected to the underground. Much cheaper option.

Guy

The person leaving the city has more power to shop around than the new arrival.

Griff

There is a 'black cab' rank for London taxis at Heathrow.

However if you book a ride with a taxi firm then they have to pay to park in short term airport parking before making their way to meet you.

Short term parking is expensive!

Bill Chidley

I presume that the author used the same company to drop off and pick up from the airport.

As someone who works within the private hire (licensed cab as opposed to 'official' London taxis), both the prices appear very competitive.

From central London, a price £40+ is pretty standard for a car to or from the airport.

A lot of correspondents appear to believe that there is a surcharge on airport collections - there is no such surcharge at any of London's 5 airports, although car parking costs vary wildly.

The only possible explanation is the collection fare includes a flat fee of £10 to cover waiting and parking, which also seems to me a very good deal.

theta

Parking at Heathrow (necessary if they pick you up there) costs £5 minimum. The rest is explained by the time wasted to park, go to arrivals to pick you up, then go back to the garage to get the car and leave.

Steven Berry

Hi, Some taxis demand more money for Airport taxi service. Airport taxi often charge more but some taxi service like dawsoncab.com take required money. But Airport taxi are normally cheap than private transfers and it is very convenient.
Thanks and keep this type of posting.