A network equilibrium model for oligopolistic competition in city bus services

This paper presents a new model for a deregulated transportation system with full representation of the city network. We assume the case in which a few private bus companies provide the totality of the urban transportation services. Each private company is assumed to have exclusive rights to operate a particular transit line. Competition among companies is given only in terms of the frequency of service as demand and transit fares are considered exogenous. The bus operators seek profit maximization whereas passengers look for the travel strategy that minimizes expected travel time. At equilibrium, marginal revenue should equal marginal cost for each operating company and, for each origin-destination pair, travel 'strategies' for passengers should be optimal. To obtain an equilibrium solution, a heuristic procedure is outlined and tested on a small network.