transport economics - deregulation of transport

Introduction to Deregulation & Transport

What is "de-regulation"?

Deregulation is the removal of controls imposed by governments on the operation of markets, particularly taking away barriers to entry.

Opening up of markets to competition can be achieved by:

· Allowing many companies to operate one route

· Introducing heavy penalties for price fixing cartels or predatory pricing

· Short franchises encourage low fares but are a disincentive to long-term investment in infrastructure and rolling stock. See contestability theory.

The criteria to evaluate the performance of bus companies include fares, the number of services, service frequency, quality of service, changes in demand, loading, number of vehicles and their quality

Experience of deregulation in the UK Bus industry

Deregulation of the local bus market has resulted in an initial increase in competition with more buses resulted in

· Benefits: More entrants, more frequent services and lower fares

· Costs:
o more buses operating below full capacity ie a fall in loading
o adding to existing congestion
o increasing pollution especially in crowded city centres

· Eventual consolidation through mergers has created an oligopoly (First Group, Stagecoach, Go-Ahead, Arriva and National Express) resulting in higher fares, lower levels of service and the withdrawal of marginally commercial routes

· Many regions now have a monopoly local bus company

IMPORTANT

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