A Product Differentiation Model of Bus Deregulation

A Product Differentiation Model of Bus Deregulation

Consumers, influenced by their incomes, are assumed to opt for private or public transport as a long-term decision. Those who have opted for public transport then choose particular services which are least costly in terms of both price and convenience. This two-stage framework involves both vertical and horizontal product differentiation, and yields a new perspective on bus deregulation. Allocative inefficiency from deregulation can be substantial, and can amount to a third of the costs of operating the bus system.

Share Content

Share on facebook
Facebook
Share on google
Google+
Share on twitter
Twitter
Share on linkedin
LinkedIn

Related Articles

Deregulating Taxi Services: A Word of Caution

This paper studies pricing and capacity decisions in markets for phone-ordered taxicabs. Firms first choose capacities and then compete in prices. As firm demand increases, so does waiting time. This dampens competition and makes prices too high from the social point of view. Efficiency improves if firms choose large capacities. In a two-firm setting, equilibrium capacities are shown to be larger if both firms maximise total profits than if they maximise profits per cab.

View Journal »