Structure, conduct, and performance approach of the Public Transportation Industry

Essay by vodkaspyUniversity, Bachelor'sA, March 2003

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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...