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Competition in transit markets

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  • Preston, John

Abstract

Despite regulatory reforms in a number of countries, competition in transit markets is still relatively rare. Moreover, where it does occur it tends to be small group in nature and the outcomes are difficult to predict. In this paper, simulation models of competition in inter-urban rail markets and urban bus markets are developed and applied in studies of Great Britain and Sweden. It is found that on busy routes head-on competition is commercially feasible (although for rail this assumes low access charges) but is not socially desirable. For routes with thin demand (or high access costs), competition may be limited to cream skimming. In most competed cases, there appears to be a tendency for the provision of too much service, at too high price and (at least for bus) at too low quality. Rather than classical Bertrand-Cournot oligopoly models, transit markets may be best described by models of oligopolistic competition based on horizontal product differentiation.

Suggested Citation

  • Preston, John, 2008. "Competition in transit markets," Research in Transportation Economics, Elsevier, vol. 23(1), pages 75-84, January.
    • Handle: RePEc:eee:retrec:v:23:y:2008:i:1:p:75-84
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    References listed on IDEAS

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    Cited by:

    1. Hörcher, Daniel & Tirachini, Alejandro, 2021. "A review of public transport economics," Economics of Transportation, Elsevier, vol. 25(C).
    2. Preston, John, 2016. "Big buses in a small country: The prospects for bus services in Wales," Research in Transportation Economics, Elsevier, vol. 59(C), pages 379-387.
    3. Preston, John & van de Velde, Didier, 2016. "Workshop 7 report: Market initiative: Regulatory design, implementation and performance," Research in Transportation Economics, Elsevier, vol. 59(C), pages 343-348.
    4. Rye, Tom & Wretstrand, Anders, 2014. "Converging structures? Recent regulatory change in bus-based local public transport in Sweden and England," Research in Transportation Economics, Elsevier, vol. 48(C), pages 24-32.
    5. Anciaes, Paulo & Metcalfe, Paul & Heywood, Chris & Sheldon, Rob, 2019. "The impact of fare complexity on rail demand," Transportation Research Part A: Policy and Practice, Elsevier, vol. 120(C), pages 224-238.
    6. Broman, Emanuel & Eliasson, Jonas, 2019. "Welfare effects of open access competition on railway markets," Transportation Research Part A: Policy and Practice, Elsevier, vol. 129(C), pages 72-91.
    7. Vigren, Andreas, 2017. "Competition in Swedish passenger railway: Entry in an open access market and its effect on prices," Economics of Transportation, Elsevier, vol. 11, pages 49-59.
    8. Vigren, Andreas, 2016. "Competition in Swedish passenger railway : entry in an open-access market," Working papers in Transport Economics 2016:18, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    9. Fröidh, Oskar & Nelldal, Bo-Lennart, 2015. "The impact of market opening on the supply of interregional train services," Journal of Transport Geography, Elsevier, vol. 46(C), pages 189-200.
    10. Hrelja, Robert & Rye, Tom & Mullen, Caroline, 2018. "Partnerships between operators and public transport authorities. Working practices in relational contracting and collaborative partnerships," Transportation Research Part A: Policy and Practice, Elsevier, vol. 116(C), pages 327-338.

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