Deregulation and Privatization of Britain's Local Bus Industry

In 1986 the British government deregulated the majority of the local bus industry, cut the amount of a subsidy, and privatized many public bus companies. Unit costs have declined significantly, cross-subsidies have been reduced, and there has been innovation in operating practices. However, mergers have increased concentration, and demand has declined due to the turmoil of service changes and the loss of network integration. In London an alternative policy has been adopted whereby there is Demsetz competition for short-term monopoly rights. The paper argues that this regime will lead to greater benefits in the long run.