Contestability of the German Long-Distance Coach Market



Contestability of the German Long-Distance Coach Market

Authors

Katrin Augustin, KCW GmbH, Berlin

Description

Until the end of last year long-distance coach services rarely existed in Germany. But the renewed German Transport Law, which was enacted on 1st of January 2013, allows operating long-distance coach services with stops not shorter than in 50 km distance. The paper reviews how the now chosen regulatory setting is functioning and whether they allow non-discriminatory market access, so a competitive and contestable market can develop. With the help of a regression model I prove whether the German long-distance coach market is contestable in relation of market concentration and the fare-setting of operators.

Abstract

Until 2012 long-distance coach services rarely existed in Germany. But the amended German Public Transportation Law, which was enacted on 1st of January 2013, allows operating long-distance coach services with stops not shorter than in 50 km distance. First, I outline the differences in the regulatory setting and the market structure before and after 2013. I review how the now chosen regulatory setting is functioning and whether they allow non-discriminatory market access, so a competitive market can develop. Deutsche Bahn as one of the most relevant incumbents and formerly monopolist, had a market share of more than 60% before the deregulation, whereas by July 2013 its market share has been sharply reduced rapidly to less about 30%. With the help of four OLS regression models I prove whether the German long-distance coach market is contestable in terms of market concentration in relation to the price setting of operators. To measure the level of competition on each bus route I use the Herfindahl-index. The paper concludes that the long-distance coach market established a high level of competition, Whereas in the beginning of 2013, the market concentration has been measured with 0.8, until July 2013 the market developed less concentrated with an index of 0.6. Furthermore, the fares at the start of 2013 are not dependent on the market structure, as the regulatory settings obviously offered non-discriminatory open access. Nevertheless, after half year of the market-opening the fare-setting show significant dependencies on the market structure. Therefrom, I conclude for a first glimpse that the market leads to predatory pricing in its first phase and is not perfectly contestable at least at this stage.

Publisher

Association for European Transport