Organizational responses to the deregulation of the bus industry in Britain

Long run productivity and profitability in the British bus industry

“…Subsequent events proved this an astute observation, as only very limited on road competition emerged (Langridge & Sealey, 2000), in turn implying limited contestability. Perhaps significantly, McGuinness, Gillingwater, and Bryman (1994) in a study of nine British bus companies, further highlighted that the capacity of an individual bus company to achieve the level of internal stability required to meet competition (if it did emerge), adapt to changing market conditions and to expand operations was severely compromised by the underlying poor financial health of such concerns. With the benefit of hindsight, this would suggest that some form of industry consolidation was inevitable.…”

Contestability: The Debate And Industry Policy

“…There are several difficulties with this approach, namely (i) the cost structures of the operators may differ from industry norms, allowing efficient operators to bid above their minimum costs, (ii) it is assumed that a new entrant could operate with the same cost structures and serve the same market demands as established operators replaced by the competitive tendering process which experience suggests is often not so, (iii) operators face a prisoner's dilemma: individually, profits are maximised by minimising costs but as an industry, there is little incentive to improve upon industry benchmarks and greater incentive to costpad and slow innovation collectively, and (iv) the re-tendering process is a process of actual competition between the incumbent (with associated advantages including considerable information asymmetries) and other furns. Such a re-tendering process is also likely to draw fewer tenders in receding industries as time passes (McGuiness, Gillingwater andBryman 1994, White 1995).…”