Edited by André de Palma, Robin Lindsey, Emile Quinet and Roger Vickerman
Chapter 32: The Industrial Organization of Competition in Local Bus Services
Philippe Gagnepain, Marc Ivaldi and Catherine Muller-Vibes INTRODUCTION In most countries, local transport services by bus, which are a major component of regional passenger transportation systems, are subject to the scrutiny of policy makers for at least two contextual reasons. First, while the passenger transport services have always been highly regulated, the public transportation policy is now experiencing deregulation and/or privatization in an industry where urban transport companies are heterogeneous in their ownership status, which can be public or private, as well as in the diversity of transport modes they offer (bus, train, underground and tramway). Second, while the modal share of bus transport services has been declining for several decades in most developed economies, the growing environmental concern raises the calls for promoting urban mass transit (as opposed to private car). This chapter is aimed at deepening our understanding of the functioning of competition in the local bus transportation industry and to evaluate its effectiveness. It provides an overview of the competitive constraints that are at work in the industry as discussed in the economic literature, and sketches empirical tests to check whether the intuitions provided by the economists are in line with the reality of the industry. To address these various issues, the first three sections of this text survey the economic literature on bus competition, emphasizing the case of UK which is used as a benchmark. We suggest that earlier contributions, proposed in the late 1980s, (that is, just after the deregulation of the industry) are very...
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