ABSTRACT
Deregulation of the local bus market, outside London, caused substantial upheaval because of ‘bus wars’ and confusion over changing service patterns. The Integrated Transport White Paper characterises post-deregulation experience in the bus industry. Like most real-world markets, the bus industry is one characterised by product differentiation. Economists have used two main types of model to consider product differentiation, models of horizontal product differentiation and models of vertical differentiation. In practice, models of horizontal product differentiation have turned out to be much more relevant for the bus industry than models of vertical product differentiation. The chapter looks at the results of competition, as evidenced from annual statistics on local bus services in England published in the Department of the Environment, Transport and the Regions Bus and Coach Statistics Great Britain 1996/97. The primary possible example of vertical differentiation in local bus markets was that between slower conventional double-deck buses, and faster minibuses.
