Are urban bus services natural monopolies?

Abstract

Although Britain's local bus services have been open to free competition for more than three years, most have continued to be operated as monopolies by the original incumbents. Some competition has occurred, but the incumbents have usually driven off entrants. This paper uses findings from case-studies of competition and from deregulation generally to consider whether monopoly operation has inherent advantages over competitive operation. If so, urban bus routes would be natural monopolies. The evidence suggests that they may be, because single-operator services are more convenient for users.