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Bus Deregulation: A Welfare Balance Sheet

Bus Deregulation: A Welfare Balance Sheet

A substantial reduction in operating cost per bus-kilometre through improved productivity is shown. However, substantial losses to users through higher fares and service instability emerge. Large increases in bus-kilometres operated did not produce any aggregate increase in ridership, but offset much of the reduction in unit cost. Overall, a small net benefit is shown in the metropolitan areas, but a net loss elsewhere. In contrast, London (subject to a competitive tendering system) shows no user or worker losses, and a substantial net benefit through higher productivity.

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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.

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