Privatisation and deregulation of urban bus services: An analysis of fare evolution mechanisms.

Abstract

Urban bus systems have been privatised and deregulated in Britain, Santiago (Chile) and
Colombo (Sri Lanka). Although similar regulations were applied in these cases, the
outcomes observed were significantly different. We create an analytical model to explain
such outcomes considering differing compositions of the bus fleet (number of operators
competing and their frequencies of service) and passengers’ valuation of time. We
conclude that perfect competition is not likely to emerge in the urban bus market.
However, while in some cases this economic distortion scarcely affects the results, in
others it significantly does so. Our model accurately predicts the outcomes observed.