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Structure, Conduct, And Performance Approach Of The Public Transportation Industry

1707 words - 7 pages

In this paper, I will analyze the structure, conduct, and performance approach of the Public Transportation Industry in general and then concentrate on the local (regional) aspect and talk about SEPTA. Before I go in-depth, I will briefly tell you what I am planning to achieve in my discussion. For structure, I will talk mainly about the number of firms, concentration, entry barriers, product differentiation and changes in demand. For conduct, I will mainly focus on price discrimination and the importance of innovation in its services. And finally, in terms of the industry's performance I will discuss price/cost and profits.First of all, we all know that the Public Transportation Industry does not "sell" tangible products, but they "sell" services: transportation to/from work, school, mall, doctor's office, etc. We also know that a substitute for Public Transportation can be something as simple as a car, taxi, bike or even walking. But how many firms are there in the industry? In Philadelphia area, there is only one "firm" (which has 100% of market share of local public transportation industry which is controlled by state and local authority) and we can see that it is a monopoly that can charge the riders any price they desire. Thus, we see that SEPTA is highly concentrated (CR1=100 and HHI=10,000). According to the latest statistics gathered by the Federal Transit Administration, tens of billions of dollars invested in transit during the last decade have done little but leave transportation support highly unbalanced: we travel nearly one hundred times as much by auto as by transit, yet we spend less than four times as much on highways as on transit. Even though transportation is a service with "peak" demand issues, SEPTA still can face "inventory" shortage. By this I mean that there might be not enough buses to carry passengers in peak hours, where on the contrary, many buses would be standing in the terminal in off-peak hours (and services during that time would not be fully utilized - a loss to SEPTA.)The number of people traveling to work by means of public transportation in 2000 was almost unchanged from 1990, regardless of over 11% growth in employment in 10 years. Public transportation has lost the market share in most of its major markets, including Philadelphia. In most markets where it increased share, it still bears a trivial proportion of the urban travel. There are no entry barriers in this already existing market. SEPTA has covered (planned) all the travel routes for their buses, trolleys, subways, etc. and they are keeping all others away from entry (and so does the local authorities). Similar to many monopoly-behavioral companies that provide services in our region, like PGW and PECO, it would be hard for other "SEPTA-like" company to enter, even if they were allowed to compete against already well-established SEPTA. The new company can't just have a "piece" of the area to serve: no one would be willing to use their service...

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