A game-theoretic analysis of competition in a deregulated bus market

A game theoretical approach is applied to model the strategic interactions between the operators in a deregulated bus market, taking into consideration price competition as well as competition over service frequency. The conditions for market entry and predatory behavior are determined. The impact of deregulation of the bus market is then assessed in terms of profits and social cost to the society. A hypothetical case is constructed to test the model. Numerical results indicate that deterrence is a dominant strategy in most market situations, which leads to lower fare and higher service frequency, and consequently brings benefits to the society.