Bus deregulation: ten years on

This paper identifies the principal areas of disagreement in the bus policy debate of 1984–85, and reviews the outcome of bus deregulation against that background. It is concluded that the commercial bus market is imperfectly contestable. Entry may occur where the incumbent is inefficient, where the incumbent is efficient but weak enough to be supplanted, or simply through over‐optimism. Incumbents deter entry by tightly controlling costs and by not leaving profitable gaps in service. Merger and acquisition is normally a better strategy than active competition; the tendency to merger has proved stronger than was recognized in the debate. In considering market performance, it is necessary in principle to distinguish between the effects of privatization, subsidy withdrawal, tendering and the abolition of the route licensing system, while recognizing that they interrelate in a complex way. Operating costs have fallen much more sharply than the opponents of deregulation expected. Service levels have risen, bu...

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