Price Warfare in Business Competition: A Study of Abnormal Competitive Behavior

By Ralph Cassady | Go to book overview

APPENDIX B
TAXICAB RATE WAR: COUNTERPART OF INTERNATIONAL CONFLICT*

Business rivalry has been likened unto war even in its ordinary aspects.1 This similarity is accentuated when firms become engaged in price warfare (1). It is interesting that price wars possess many of the elements of armed conflict--"enemy" moves in the form of price reductions which may be interpreted as unfriendly by a competitor; ultimata followed perhaps by countermoves by firms which are adversely affected: the use of strategems to mislead the "enemy"; additional hostile activity in the form of further reductions or threatened reductions; the dissemination of propaganda to influence public opinion; the "signing" of peace treaties; and, finally, postwar problems. A taxicab rate war waged in Hawthorne, California, in 1949 included most of these elements, as well as others seldom found in price wars. It therefore makes an interesting case study for students of conflict.2

Price wars involving taxicab service appear to be rare, partly perhaps because in most communities rates are regulated by city ordinance and operators are not free to price as they please. However, a very interesting price battle occurred among cab companies in Hawthorne, California,3 in the fall of 1949.4 Three taxicab firms were serving the community at the time--City Cab Company, Yellow Cab Company,5 and Veteran Cab Company. The cab fare charged by all three companies before the "war" was 30¢ per flag drop and 30¢ per mile.


Inception of the "War"

The price dispute started, according to reports, when one company offered a $10 ride book for $9 (although one of the participants stated that this initial offer was a $6 book for $5). The owners of the rival companies tried to persuade the price-cutter to rescind the bargain offer. When this course failed, one of the rivals countered

____________________
*
Reproduced with permission from the Journal of Conflict Resolution, December 1957, pp. 364-68.

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