Many commentators have reported that a common reason for regulating local bus services has been that the competitive benefits to consumers on a completed route -from reduced fares, waiting times and consequent generated traffic -are outweighed by the additional resource costs involved in competition. This note investigates the conditions under which the argument holds. A cost-benefit model of a bus route, based on a standard social welfare approach, was developed. The benefit of bus travel, to passengers, is measured by the area under the demand curve but above the generalised cost of travel. Therefore, a Marshallion measure of surplus is being used. In addition to this benefit to consumers, a producers' surplus is incorporated in the model. This is the divergence (positive or negative) of revenue from costs. Costs are assumed to be a function of the frequency offered by the bus company. It appears from the results that in the short run any additional capacity introduced by a competitor will lead to a reduced level of social welfare. (TRRL)

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Filing Info

  • Accession Number: 00392871
  • Record Type: Publication
  • Source Agency: Transport Research Laboratory
  • Files: ITRD, TRIS
  • Created Date: Mar 29 1985 12:00AM