Privatisation and Deregulation of Urban Bus Services: An Analysis of Fare Evolution Mechanisms

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 does so significantly. Our model accurately predicts the outcomes observed. © 2007 LSE and the University of Bath