Competitive regimes within the European bus industry: Theory and practice

There seems to be a general move within Europe and North America towards a reduction in economic regulation and a further move towards public enterprise privatisation. This paper takes a European-wide analysis of the conditions of competition and contestability within the bus industry. The first part examines the theoretical arguments for regulatory reform and focuses in particular on the dynamics of the likely responses from the incumbent operators in anticipating the actual form of deregulation prior to legislative changes, and in the likely consequent actions to maintain their market position -- Pre-entry actions and post-entry reactions. Comment is also made on whether contestable bus markets are sustainable. The evidence of 10 years experience in Britain will be used to argue these propositions. The second part of the paper argues the case that potential competition is not enough and that certain actions need to be taken to ensure the market remains contestable. The experience of Britain is compared to the competitive regimes in other European Countries.