Imagine the scenario:
You live in Winchester and don’t drive.
You’ve gone out for the night.
You’re catching an early flight from Southampton airport the next morning.
Because you’re a bit slow, it doesn’t occur to you that trains don’t go to the airport early enough, until:
You return home at 1am that morning from the pub to check the timetable.
You realise they start at least an hour too late.
You go to Google Maps, and type in winchester taxi.
You phone up the first company listed.
You eventually convince them that, yes, you really do want a taxi in 4 hours, and you aren’t drunk.
You catch a small amount of sleep.
The taxi arrives on time, you get to Edinburgh on time, and have a great weekend.
The crucial part here was that Wintax were the first company listed. If I’d had the time and patience, I might have rung round and got some quotes, but the situation being as it was, I went for the first option without hesitation. I wasn’t particularly price-sensitive. Wintax got my business simply by being savvy enough to be first on the list (actually, it seems this happens because Google orders according to geographic distance, but arguably it’s still good business practice to locate near the centre of Winchester).
The book I’m reading at the moment, The Undercover Economist, contains a similar discussion pertaining to the location of coffee shops in Waterloo station. It (perhaps indirectly) seems to debunk a common myth that free markets drive down prices to near-cost levels. Sometimes people will pay a lot for something intangible, such as location or convenience. I’ll try to avoid making the above mistake again, though.