11th July 2013
Property rights can create genuine competition in the urban bus market
This is a personal research note.
I have discussed some bus reform issues here. Recently a FB friend asked me to comment on a public transport (bus) issue. I won't be able to find time to answer this friend but I can discuss one of the more revolutionary ideas in this area, below.
Competition in the bus market is particulary complex. I won't go into details here for there is a lot of literature on the subject. In this regard I recommend Curb Rights – a book which could open bus markets to genuine competiton. [Book: Daniel B. Klein, Adrian Moore and Bin yam Reja (1997). Curb Rights: A Foundation for Free Enterprise in Urban Transport . You can get a flavour of the work through this free article.]
Basically the idea is to allocate the curb (kerb in British English) – the bus stop – to any private buyer. This can be done through long term lease, say of 99 years. Thereafter private bus companies are free to bargain for the right to pick up passengers from the bus stop. They have to pay for this right to stop and pick up passengers, thus unlocking the economic value of the bus stop as a separate economic business.
This is how the model works:
Incentives of the bus stop owner
The bus stop owner wants to:
- maximise the number of buses that come by to pick up his passengers in a systematic manner
- ensure that no bus stops unnecessarily
- ensure that no bus speeds and tries to overtake, thus harming his passengers
- ensure that the buses that come provide comfort and amenities to his passengers.
Incentives of bus owner
The bus owner has competitive tension and wants to minimise the number of buses and pick up as many passengers as possible in one go, thereby experiencing economies of scale.
As a result of the bargain, bus schedules emerge naturally. The bus stop owner has the incentive to spread word about the bus schedule within his catchment area since the more the passengers that use his bus stop the more the money he gets.
More later when I find time.