Quality in an oligopolistic transport market

Abstract

The transport sector has generally been subject to deregulation during recent decades, but still many transport authorities want to be in control of quality aspects of the services provided.We build on an established economic model to discuss the role that quality plays in the competitive situation under different market conditions. We use the concept of net quality that comprises passengers’ perceptions of quality, time costs, and operators’ costs. The results enable policy makers to adjust their market intervention to ensure a desired quality level depending on market characteristics. Several testable implications for transport markets are derived from the analysis.