Contestability & Privatisation Essay- Transport Economics

Here are two essays:

One on contestability and the other on privitisation entitled:

Discuss the extent to which the deregulation of buses in the UK has been beneficial (20)

I hope this helps, if it has please check out my other notes!

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  • Created by: James
  • Created on: 23-06-11 17:06

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A) The characteristics of a contestable market

A contestable market it is a market in which the the costs of entry and
exit are zero. This means that it is easier, to some extent, for firms to
enter and exit the market as the initial start-up costs are zero, and…

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A monopoly may price at P1 and reach a profit maximising equilibrium. If a
market is contestable, there is downward pressure on price, because the
existence of supernormal profits provides a signal for new firms to enter
the market and if the existing monopolist is producing at too high a…

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contestable market, all firms are subject to the same regulations and state
of technology.

In monopolistic competition, there is a barrier to entry which exists in
the form of customer loyalty. It takes firms many years to gain a
sufficient customer base and loyalty which to newly entering firms would…

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number of firms will compete on price and quality. You would expect
therefore that the price of fares will decrease, and the quality of service
will increase and consumer surplus will also increase. Lower costs have also
been found to result from deregulating bus services. For example, reductions of

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be likely in the future (if unsubsidized) to cease to exist. Furthermore, the
government spending on the subsidies incurs a substantial opportunity
cost, which could be better spent elsewhere and is debatable in itself.

It could also be argued that private firms have little interest in consumer
safety, as it…

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