High concentration in the less-than-truckload motor carrier industry is examined from the perspective of the differentiated product theory. Under the condition that cost increases of high service quality are within the limits that shippers are willing to pay, only a small number of competing carriers can co-exist.
The paper examines the impact of deregulation on service co-ordination in the British conurbations outside London. Co-ordination decreased significantly in respect of timetables, fares and passenger information in particular in the period immediately following deregulation. Since then some aspects of co-ordination have improved. On balance, the author’s judgement is that there has been a net decrease in consumer welfare.
Lower prices encourage firms to economise by increasing load factors; on the other hand, lower prices require higher service frequency to accommodate the additional passengers. Thus inverse price/quality tradeoffs are possible in public transport, and did occur when the US airline industry was deregulated.
