HEREFORD WAS A TRIAL AREA IN WHICH BUSES WERE DEREGULATED BEFORE NATIONAL DEREGULATION WAS BROUGHT ABOUT BY THE TRANSPORT ACT 1985. THE EFFECTS OF COMPETITION WERE MONITORED AND SOME CONCLUSIONS DRAWN FOR DEREGULATION GENERALLY. THE PAPER CONSIDERS THE OPERATING REGIME AND THE CHARACTERISTICS OF THE TRIAL AREA DESCRIBING THE SERVICES IN THE CITY OF HEREFORD AND THE SURROUNDING RURAL AREA. RESULTS SHOWED THAT COMPETITION, OR THE THREAT OF COMPETITION, EXERTS PRESSURE ON OPERATORS TO REDUCE COSTS AND MOST OF THE BENEFITS OF THESE REDUCED COSTS ARE PASSED ON TO PASSENGERS. OPERATORS PREFER ROUTES ON WHICH THEY ARE THE SOLE OPERATORS AND THEY MAY ADOPT ENTRY-DETERRING STRATEGIES SUCH AS RUNNING AT RELATIVELY HIGH FREQUENCIES USING MINIBUSES. MUTUAL LOSS-INDUCING WARS CAN BE RUN ON ROUTES THAT ARE RUN COMPETITIVELY IN AN ATTEMPT TO REMOVE COMPETITION. THESE WARS ARE ONLY EFFECTIVE IF THE COMPETITION IS REMOVED QUICKLY OTHERWISE AN EQUILIBRIUM-SEEKING STRATEGY WOULD BE BETTER. DEREGULATION IS LIKELY TO GIVE HIGHER FREQUENCIES AND HIGHER FARES THAN ARE OPTIMAL. LOW-DEMAND ROUTES ARE THREATENED BY A LOSS OF MASS-SUBSIDY THAN BY DEREGULATION. THE COUNTY COUNCIL HAD NO DIFFICULTY IN MAINTAINING COUNTY SERVICES WITH A REDUCED SUBSIDY. COMPETITIVE TENDERING FOR SUBSIDY EXERTED A PRESSURE TO KEEP OPERATING COSTS DOWN.
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