Ownership of a taxi medallion grants one the rights to operate a taxi in a highly regulated market. Although there are benefits for the public from taxi restriction, such as less traffic, the potential profit from owning a medallion drives its regulation. These medallions are worth hundreds of thousands of dollars in large cities, and about a million dollars in NYC. Since the average taxi driver is unable to afford ownership of a medallion, very wealthy individuals own many medallions and lease them out to taxi drivers. For many years, the small group of medallion owners have been successful in restricting output in order to maximize profit.
However, a few mobile applications such as Uber and Lyft are removing almost all entry barriers from the taxi industry. Anyone with a working car and phone can work as a taxi driver with low transaction costs for using the mobile app. The supply of drivers is spiking up, and this competition will certainly take its toll on taxi drivers and their medallions' owners. I expect that the value of medallions will grow much slower in the coming years, if not even begin to decrease in value.
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