Commercial competition between bus operators is likely to eliminate most of the cross-subsidy presently existing between individual bus services. A computer model of a large urban bus network, based on the city of Bristol, has been used to examine the consequences of this. This existence of external subsidy in the base conditions obscured the pattern of cross-subsidy, so that withdrawal of cross-subsidy had to be effected by making each service break even subject to a uniform distribution of external subsidy. Different methods of achieving this uniform distribution were used, but the results were similar in all cases. With cross-subsidy removed in this way, total patronage on the network fell by 2 per cent, and the net passenger disbenefit was equivalent to 2 and a half percent of the total generalised cost of travel. Six service groups out of a total of 22 were no longer viable. The modelling illustrated how elimination of cross-subsidy was likely to enhance services with high demand or low costs, at the expense of low-demand, high-cost services. Whether the net effect is a benefit or disbenefit is likely to be sensitive to variation in the demand elasticities, but the net change is likely to be small. In this case study it would take only a 5 per cent reduction in operating costs to offset the overall disbenefit. Even so, reductions in costs will not prevent some services from becoming unsupportable commercially; if these become dependent on external subsidy, their maintenance would require an external subsidy equal to 20 to 30 per cent of existing subsidy.

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