From Ex Ante Limited Cognition to Ex Post Negotiations Breakdown: An Explanation of Taxi Strike in China

This paper explains the phenomenon that taxi drivers of all over the country on strike with bounded rationality model, and draws several conclusions. First of all, Parties' limited cognition leads to contracts are incomplete, which will require renegotiation. The main reason of the strike is that taxi drivers own little power on the renegotiation but not the increased rent, unauthorized taxi and so on. Secondly, in order to acquire much more renegotiation power they adopt this extremely behavior. This phenomenon, on one hand, indicates that the taxi industry is still under developing; on the other hand, it implies the disadvantage of the current institution.