Question

Many cities regulate the number of taxi licenses, and there is a great deal of competition for both new and existing licenses. Suppose that a city has decided to sell 10 new licenses for $25,000 each. A lottery will be held to determine who gets the licenses, and no one may request more than three licenses. Twenty individuals and taxi companies have entered the lottery. Six of the 20 entries are requests for 3 licenses, nine are requests for 2 licenses, and the rest are requests for a single license. The city will select requests at random, filling as much of the request as possible. For example, the city might fill requests for 2, 3, 1, and 3 licenses and then select a request for 3. Because there is only one license left, the last request selected would receive a license, but only one.
a. An individual who wishes to be an independent driver has put in a request for a single license. Use simulation to approximate the probability that the request will be granted. Perform at least 20 simulated lotteries (more is better!).
b. Do you think that this is a fair way of distributing licenses? Can you propose an alternative procedure for distribution?


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  • CreatedSeptember 19, 2015
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