Equilibrium characteristics in an urban public transportation system under free competition conditions

This paper develops an explanatory model of the behavior characteristics of a public transportation system with private operators, under free competition conditions, that is, free entrance and unregulated prices. First, the traditional competitive microeconomics model is applied to the public transportation system. Then, an alternative model is developed, that considers the special characteristics of the type of demand that operators confront in this kind of system. The model shows that these demands do not meet the assumptions of the neo-classic competition model, since operators can choose the price they charge from a wide range of values which means they have an important monopolistic protection. It is shown that a key parameter in the determination of this monopolistic protection band is the economic value of time for service users. The number of operators and the cycle time is also important and the influence of the different ways that operators can form coalitions is also discussed. The characteristics of the stability of the market and the existence of equilibrium states is then analyzed. Finally, the influence of the mechanisms of free entrance and the influence of the externalities of congestion and its impact in the use of the capacity are analyzed.