THIS PAPER CONSIDERS FOUR RELATED QUESTIONS OF TRANSPORT ECONOMICS RELATED TO DEREGULATION OF THE BRITISH INDUSTRY: (1) WHAT A PRIORI EVIDENCE IS THERE THAT THE BUS MARKET IS HIGHLY CONTESTABLE, AND HOW WELL HAVE THE PROVISIONS OF THE 1985 TRANSPORT ACT PROMOTED CONTESTABILITY? (2) IS MARKET CONTESTABILITY A SUFFICIENT CONDITION FOR WELFARE MAXIMISATION? (3) WHAT ADDITIONAL LIGHT DOES THE BEHAVIOUR OF BUS COMPANIES THROW ON THESE ISSUES? (4) WHAT ARE THE IMPLICATIONS OF THIS ANALYSIS FOR BUS MARKET CONTROL MECHANISMS? ASSUMING THAT AN IMMEDIATE MOVE TO COMPREHENSIVE COMPETITIVE TENDERING IS UNLIKELY,THE AUTHOR CONSIDERS THAT THE FOLLOWING INSTITUTIONAL REQUIREMENTS ARE NECESSARY IN ORDER TO ACHIEVE THE BEST RESULTS FROM DEREGULATION: (1) ALTHOUGH THE INITIAL MARKET STRUCTURES ARE APPROPRIATE, IT WILL BE NECESSARY TO MAINTAIN A CONTINUING CONTROL TO PREVENT MONOPOLISATION; (2) IT IS NECESSARY TO DEVELOP AN EFFECTIVE SET OF STANDARDS FOR, AND CONTROL OVER, RESTRICTIVE PRACTICES; (3) THE RESPONSIBLE LOCAL AUTHORITIES SHOULD BE GIVEN EFFECTIVE FACILITIES FOR INFLUENCING THE MANAGEMENT OF BUS TRAFFIC IN THEIR AREAS, THE INTEGRATION OF PUBLIC TRANSPORT, AND THE PROTECTION OF BUS SERVICE QUALITY AND COST FOR DEPRIVED AREAS; (4) OWNERSHOP OF ASSETS AND OPERATIONAL RESPONSIBILITY MUST BE MORE CLEARLY REMOVED FROM LOCAL POLITICAL CONTROL. THE AUTHOR CONCLUDES THAT BUS DEREGULATION APPEARS TO BE REDUCING SUBSTANTIALLY THE COSTS OF ALL BUS OPERATORS, AND THAT IT HAS HITHERTO BEEN NEITHER AS SUCCESSFUL AS ITS SUPPORTERS HAD HOPED NOR AS DAMAGING AS ITS CRITICS HAD FEARED.
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