Tuesday, August 14, 2007

Why Greyhound Sucks

Gareth Higgens manages to make a movie review for Once into a screed about Greyhound. He rightly identifies the problem, but fails to understand the solution. (If a government program isn't working, all we need is more government programs, right?)

The problem with Greyhound is its monopoly.

But how did they get a monopoly and what is holding it up?

A firm can only get monopoly power if they charge a low enough price that new competitors can't make a profit by entering the market. This should be good for the consumer because they are enjoying the lowest possible prices. This situation would be called a natural monopoly, but there are few instances of these, and none of them represent an economic injustice.

Greyhound is the other kind of monopoly, the kind subsidized by the state.

Some portion of every greyhound ticket is already paid for before a customer walks up to the counter. These subsidies artificially create the availability of low-ish prices. Also, they provide service to locations which otherwise would not receive service at all.

Because Greyhound does not face competition and is promised funding for routes (even if nobody rides) in these subsidized markets they have no incentive to provide good service, or even to run their busses on time. Also, they have to run their busses through every rinky-dink town along the way making the trip especially long. As a result, middle class and upper class Americans chose not to take the bus. They'll fly or drive themselves, in a rental car if they must, instead. Indeed the last time I rode Greyhound was 9 years ago, NC to California on a 2-week student pass. On and off wherever I wanted to go. But I would never take my wife and kids on such a bus. I was a shady character myself, then...

Remove the subsidy and competition will renew. Instead of the huge, wasteful, aging busses, smaller busses would serve the rinky-dinks off of spur lines, and the main lines would become more efficient, inviting use by more time-conscious individuals. As more people ride, the average cost per customer would go down and in the long run prices would become less expensive for everyone.

Where there is heavy enough traffic, competitors have risen up anyway. I have heard some interesting stories about the Chinatown bus out of NYC, and I have seen some of the migrant worker busses here in NC.

Artificially low prices that confuse incentives result in inefficiencies and almost always lower quality service. The same thing is happening in the airline industry lately (anyone lost a bag in the last few months?).

Stop trying to solve problems by manipulating coercive power, the state. Search for voluntary mechanisms which allow for free exchange and contract, the market.

2 comments:

DCnaive said...

i'm currently stuck inthe situation u describe and while i dont subscribe to your overall philosophy (we come to our conclusion from different starting lines), i agree that it is up to the state to ignore come ons and demands by large companies like greyhound. This is one of those situations wherethe market fails by itself and transportation is important not a frivolous thing. The state has the power to open competition and work with individuals and businesses to find a better solution. Instead we have a company that claims it can be held liable for nothing not even their own mechanical failure or overbooking.

Aidyl said...

I just took my first greyhound trip from Springfield, MO to Dallas, TX and they really screwed me every step of the way. We broke down for 4 1/2 hours on the side of the road when the driver knew there was a problem when we left the depot in Tulsa but he didn't want to wait for the repair man. Well we waited later with the dorr stuck open in 5 degree blowing snow! Then they moved me around to get me to Dallas but I ended up an hour away from my destination point because of the over 6 hours of delays, whcih was better than staying in the OKC depot overnight where I saw women shooting up drugs in the bathroom. Then when I was heading home, after a drunk man cussed me out for half the trip, they lost my bag. This is the part that gets me the worst. They told ME to call the stations' numbers. THEY lost MY bag, why am I calling for them to find my bag? WTF!? Well 3 days later, still no bag, so they offer me $100 for it, when just the bag was $75 not counting any of my stuff that was in it. I had $200 worth of panties and $100 worth of pants alone plus a $40 hair dryer. I want them to comp my next trip, because as the blog post points out, I don't many options for cheap travel. They never answer the phone for me to complain though, which matches the attitude I got at the stations at every stop so I am not surprised in the least. Greyhound is ran by the devil himself, I'm sure of it. Lucky for them I have a smoking hot lover that I have to get to in Texas on the regular, so i am willing to endure some hellfire. lol