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Competition in transit markets


  • Preston, John


Despite regulatory reforms in a number of countries, competition in transit markets is still relatively rare. Moreover, where it does occur it tends to be small group in nature and the outcomes are difficult to predict. In this paper, simulation models of competition in inter-urban rail markets and urban bus markets are developed and applied in studies of Great Britain and Sweden. It is found that on busy routes head-on competition is commercially feasible (although for rail this assumes low access charges) but is not socially desirable. For routes with thin demand (or high access costs), competition may be limited to cream skimming. In most competed cases, there appears to be a tendency for the provision of too much service, at too high price and (at least for bus) at too low quality. Rather than classical Bertrand-Cournot oligopoly models, transit markets may be best described by models of oligopolistic competition based on horizontal product differentiation.

Suggested Citation

  • Preston, John, 2008. "Competition in transit markets," Research in Transportation Economics, Elsevier, vol. 23(1), pages 75-84, January.
  • Handle: RePEc:eee:retrec:v:23:y:2008:i:1:p:75-84

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    References listed on IDEAS

    1. Spiess, Heinz & Florian, Michael, 1989. "Optimal strategies: A new assignment model for transit networks," Transportation Research Part B: Methodological, Elsevier, vol. 23(2), pages 83-102, April.
    2. Zubieta, Lourdes, 1998. "A network equilibrium model for oligopolistic competition in city bus services," Transportation Research Part B: Methodological, Elsevier, vol. 32(6), pages 413-422, August.
    3. Zhou, Jing & Lam, William H.K. & Heydecker, Benjamin G., 2005. "The generalized Nash equilibrium model for oligopolistic transit market with elastic demand," Transportation Research Part B: Methodological, Elsevier, vol. 39(6), pages 519-544, July.
    4. Salop, Steven C, 1979. "Strategic Entry Deterrence," American Economic Review, American Economic Association, vol. 69(2), pages 335-338, May.
    5. Novshek, William, 1980. "Equilibrium in simple spatial (or differentiated product) models," Journal of Economic Theory, Elsevier, vol. 22(2), pages 313-326, April.
    6. Wichiensin, Muanmas & Bell, Michael G.H. & Yang, Hai, 2007. "Impact of congestion charging on the transit market: An inter-modal equilibrium model," Transportation Research Part A: Policy and Practice, Elsevier, vol. 41(7), pages 703-713, August.
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    Cited by:

    1. Preston, John, 2016. "Big buses in a small country: The prospects for bus services in Wales," Research in Transportation Economics, Elsevier, vol. 59(C), pages 379-387.
    2. Preston, John & van de Velde, Didier, 2016. "Workshop 7 report: Market initiative: Regulatory design, implementation and performance," Research in Transportation Economics, Elsevier, vol. 59(C), pages 343-348.
    3. Rye, Tom & Wretstrand, Anders, 2014. "Converging structures? Recent regulatory change in bus-based local public transport in Sweden and England," Research in Transportation Economics, Elsevier, vol. 48(C), pages 24-32.
    4. repec:eee:ecotra:v:11-12:y:2017:i::p:49-59 is not listed on IDEAS


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