Testing for fairness in regulation: Application to the Delhi transportation market

I report a remarkable finding, that regulatory authorities, who have no a priori knowledge of Rabin’s 1993 fairness axioms (associated with a very specific utility function), have always proposed legal fares in the auto-rickshaw (three-wheeler) market in New Delhi that satisfy them. Regulated fares are ignored by auto– rickshaw drivers and customers. They bargain on prices among themselves. Newly announced fare hikes are effective enough to ensure the prevalence of legal uniform (non-negotiated) prices for a considerable amount of time. I suggest that the two of the most recent hikes have satisfied Rabin’s fairness axioms. The results, I report, are robust to different cooperative games of bargaining.