BUS DEREGULATION AND PRIVATISATION: AN INTERNATIONAL PERSPECTIVE. CHAPTER 4. CONTESTABILITY IN THE UK BUS INDUSTRY, EXPERIENCE GOODS AND ECONOMIES OF EXPERIENCE

The aim of this paper is to question whether the attainment of a genuinely contestable market is possible within a reasonable time span, when beginning from a position of serious market distortion brought about by long standing regulations, and when confronted with potential consumers and suppliers without perfect knowledge. It also aims to explain the problems which have arisen in several other transport sectors (such as USA civil aviation policy) where policy reforms have been put in train to stimulate contestable forces. The recent deregulation of the United Kingdom bus industry forms the empirical basis for the analysis, and initially this is discussed in terms of basic contestable market theory. This is followed by, firstly, a section which considers relevance of regulatory reform in conditions where the market supplies goods, i.e. Goods where consumers' decisions are influenced by their past experience of particular goods. This is then followed by an assessment of the role which 'economies of experience' -whereby production costs fall with the length of time a supplier has been in the market -play in blunting attempts to move from a regulated market to a liberalised regime. For the covering abstract of the book see IRRD 826280.