The pure free market will theoretically result in economic efficiency being achieved. At the heart of this proposition is the idea of consumer sovereignty, where producers that best meet the material wants of consumers will be the most successful. With some notable exceptions however, few transport markets work along free market principles, and hence by implication with little consumer sovereignty. Deregulated bus markets however, ‘should’ show evidence of the theorem. This paper therefore examines the English deregulated market to examine if this is indeed the case. An overall assessment of performance in terms of fare levels, technical efficiencies, profitability and user satisfaction is undertaken, and a correlation matrix estimated from which some overall patterns become clear. This is further developed through a more formal cluster analysis, out of which emerges a clear five cluster model. Clusters identify operators as classic oligopolists, efficient profiteers, mature market operators, the consumers' choice and the low fare operator. The overriding conclusion is that whilst there is some evidence of consumer sovereignty, the vast majority of local English bus markets contain producer centric operators that remain protected by significant barriers to entry. As a consequence, the market cannot regulate its own behaviour to produce economically efficient bus services.
Cowie, J. (2014). Performance, profit and consumer sovereignty in the English deregulated bus market. Research in Transportation Economics, 48, 255-262. https://doi.org/10.1016/j.retrec.2014.09.049