A few years ago, it was prevalent. All over Singapore as well as many other cities in the world, bike sharing was the rage. And so were all the bikes strewn on grassland, pedestrian pathways, canals and bus-stops. How awful!
One of the negative externality problems with bike sharing services is the issue of “parking clutter”. Since bike sharing services allowed users to pick up and drop off bikes at any location within a designated area, it led to a situation where bikes were left literally anywhere and everywhere, causing clutter and obstructing pedestrian traffic. This created inconvenience for pedestrians and posed a safety hazard, especially for the elderly and those with disabilities.
Furthermore, improperly parked bikes could damage public property, such as trees and street signs, and add to the costs of maintaining and cleaning up public spaces. In some cases, abandoned or discarded bikes create environmental hazards, such as polluting waterways or disrupting wildlife habitats. Not to mention the eye-sore.
Obviously, a lot of external costs imposed on third parties (neither biker nor bike sharing firm).
To address this problem, many cities have implemented regulations or guidelines for bike sharing services, such as requiring companies to redistribute bikes to ensure even distribution throughout the city, incentivising users to park in designated areas, or imposing fines or penalties for companies that fail to manage their bikes properly.
What did Singapore do?
In Singapore, the government implemented a licensing regime for bike sharing operators, requiring companies to adhere to certain rules and guidelines in order to operate in the city. These guidelines include requirements for companies to redistribute their bikes regularly, to maintain a minimum number of bikes per service area, and to ensure that their bikes are parked in designated areas.
The LTA also set a limit on the number of bikes (quota) that each operator could deploy in Singapore, based on their proposed operations and ability to manage their fleet. This was done to prevent an excessive number of bikes flooding the streets and causing issues such as obstruction and safety hazards.
Several bike-sharing companies exited Singapore due to various reasons, including intense competition, financial difficulties, and regulatory challenges. Bike-sharing companies are required to comply to those regulations or be fined up to $100,000, reduce their fleet size, be suspended, or have their licenses revoked. Thus their exiting is quite understandable as Singapore is after all a very small market.
Since 2019, the LTA implemented regulations to directly penalise bikers who don’t park their shared-bicycles properly. A fine of S$5 would be imposed. Those who failed to park their bicycles properly for three times in a calendar year are banned from using shared-bike services for a month. Each subsequent ban will be for a longer period, up to a year.
This has helped to incentivise bike sharing operators to manage their bikes properly and has reduced the incidence of “parking clutter” in public spaces.
Despite the exit of some bike-sharing companies, there are still several providers operating in Singapore, and the market does not appear to be monopolised. As of Jan 2023, 3 bike-sharing companies exist in Singapore.
As a result of those policies, the situation in Singapore has improved significantly. According to a 2020 report by the LTA, the number of impounded bikes has decreased by over 70% since the introduction of the licensing regime, and the number of complaints about bike sharing services has also declined.
Overall, Singapore’s policies for managing bike sharing services have been successful in mitigating the negative externalities associated.
Economics students should be well-versed with the externality problem as well as be able to discuss the policy solutions. Can you draw the diagrams for the policies? If not, you had better join our JC A Level & IB Economics Tuition today! You may also wish to check out our post on how to draw externality diagrams.
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