ABSTRACT
Britain’s railways were reformed as a result of the 1993 Railways Act and related legislation. A near unique aspect to British Rail’s privatisation was the transfer of businesses that had little chance of making a profit to the private sector. In 1993/4 British Rail’s passenger business as a whole only covered 72% of its costs, based on the accounting conventions then in use. The passenger business of British Rail was horizontally separated into twenty-five geographically based train operating companies. These businesses were then privatised via a franchising regime administered by the Office of Passenger Rail Franchising. The chapter examines quality competition by examining the prospects for a slow but cheap service running on a parallel route. It identifies four attributes of a franchise that were worthy of detailed quantitative analysis in a Stated Preference bidding experiment. These were: subsidy requirement; contract length; exclusivity; and degree of regulatory control.
