A Game-Theoretic Analysis of Competition in a Deregulated Bus Market
operations - frequency, land use - planning, economics - profitability, economics - benefits, organisation - competition, organisation - regulation, mode - bus, mode - mass transit
Transit, Strategies, Strategic planning, Social costs, Social benefits, Sensitivity analysis, Public transit, Profits, Priorities, Prices, Objectives, Mass transit, Local transit, Goals, Game theory, Gain, Frequency of service, Externalities, Deregulation, Competition, Bus lines
This paper uses a game theoretical approach to model the strategic interactions between operators in a deregulated bus market. The model takes into consideration price competition as well as competition over service frequency. The conditions for market entry and predatory behavior are determined. The impact of deregulation of the bus market is then assessed in terms of profits and social cost to the society. A hypothetical case is constructed to test the model. Sensitivity analyses are carried out for various market conditions characterized by the sunk cost for market entry and the total market demand. Numerical results indicate that deterrence is a dominant strategy in most market situations. Since deterrence behavior leads to lower fare and higher service frequency, deregulation in the bus industry does increase the attractiveness of public transport and benefits society.
Wang, Judith, Yang, Hai, (2005). A Game-Theoretic Analysis of Competition in a Deregulated Bus Market. Transportation Research Part E: Logistics and Transportation Review, Volume 41, Issue 4, pp 329-355.