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Why Competition Does Not Work in Urban Bus Markets: Some New Wheels for Some Old Ideas

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  • Andrés Gómez-Lobo

Abstract

In this paper a model is presented based on ideas borrowed from the job search and price dispersion literature to characterise the pricing equilibrium of a competitive bus market in a more general setting than previously found in the literature. The results indicate that collusion is not required to obtain a monopoly price structure. Rather collusion can be interpreted as a coordination device among operators to reach their most preferred equilibrium. The results rationalise some of the stylised facts observed in liberalisation experiences around the world, including rising prices, excessive entry, convergence of fares among operators, and other observed behaviour. © 2007 LSE and the University of Bath

Suggested Citation

  • Andrés Gómez-Lobo, 2007. "Why Competition Does Not Work in Urban Bus Markets: Some New Wheels for Some Old Ideas," Journal of Transport Economics and Policy, University of Bath, vol. 41(2), pages 283-308, May.
    • Handle: RePEc:tpe:jtecpo:v:41:y:2007:i:2:p:283-308
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    Cited by:

    1. Philippe Gagnepain & Marc Ivaldi & Catherine Muller-Vibes, 2011. "The Industrial Organization of Competition in Local Bus Services," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 32, Edward Elgar Publishing.
    2. Douglas SWARTS & Mildred E. WARNER, 2014. "Hybrid Firms And Transit Delivery: The Case Of Berlin," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 85(1), pages 127-146, March.
    3. Bataille, Marc & Steinmetz, Alexander, 2013. "Intermodal competition on some routes in transportation networks: The case of inter urban buses and railways," DICE Discussion Papers 84, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    4. Fageda, Xavier & Sansano, Sergi, 2018. "Factors influencing prices and frequencies in the interurban bus market: Evidence from Europe," Transportation Research Part A: Policy and Practice, Elsevier, vol. 111(C), pages 266-276.
    5. McHardy, Jolian & Reynolds, Michael & Trotter, Stephen, 2023. "A consumer surplus, welfare and profit enhancing strategy for improving urban public transport networks," Regional Science and Urban Economics, Elsevier, vol. 100(C).

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