After three years of deregulation, local bus routes in Britain are still mostly operated as monopolies, but enough have been operated competitively to have provided a lot of experience. This paper presents empirical evidence from case studies of competition, which is then used to explain the structure of the market. The conclusions are that routes of the kind liable to competition earn good profits when operated as a monopoly, but not when operated competitively. Therefore entrants do not make profits while competition lasts, and the aim of entry is to capture some of the monopoly profits by displacing the incumbent or colluding. However, entrants have generally failed to do this. The main reasons seem to be that incumbents have better local knowledge, and are often financially stronger. Therefore entrants' prospects are poor. It follows that, contrary to the Government's expectation on deregulation, the effect of potential entrants in controlling monopoly operators is weak. However, the monopolists have not yet seriously exploited their position. (Author/publisher).
Samenvatting