Regulation, Competition and Market Structure: A Literature Review of the Stage Bus Industry

The 1985 Transport Act changed the regulatory constraints imposed on the British stage bus industry and has had important impacts on competition and market structure. In the discussion that preceded and immediately followed the Act a wide range of microeconomic theories and models were developed to explain possible impacts. The general aim of this paper is to review the literature in this field. More specifically, it will be attempted to develop a suitable taxonomy of the different models and theories of market structure that have been developed, common strands throughout the literature will be highlighted and models (and theories) reviewed in light of recent empirical evidence. This paper will act as a background document to subsequent work including an examination of contestability in Hereford (Preston, 1988) and Preston (Mackie and Preston, 1988), the use of games theory to explain competitive outcomes, predatory behaviour, collusion and mergers/acquisitions (Preston, 1989) and an assessment of the role of the minibus (Martinez, 1988, Preston, 1989).