Service differentiation and competition

In economic theory, product and service differentiation is a rational behavior by firms and households in the process of innovation, of introduinge a new product or service, of trial and error. For instance, instead of producing just plain white t-shirts without collars, firms and households produce various types and designs of clothes: t-shirt with collar, without collar, various designs (flowery, pictures of sports heroes, musicians and rock stars, company logo, etc.) and colors, and so on.

The dominant bus line in Negros island (Neg. Occidental and Neg. Oriental provinces) is Ceres bus line. Ceres also dominates the whole of Panay island (the 4 provinces of Aklan, Capiz, Iloilo and Antique), Cebu province, and even the whole of mainland Mindanao (through its sister company, Bachelor-Rural Transit).

In Negros Occidental, Ceres introduced various services with varying fares. First is air-con buses that travel from Bacolod to Cebu cities, charging around P1.60/kilometer per passenger. Second is ordinary (non-air-con), regular buses that charge around P1.00/kilometer per passenger and pick up people along the way. Three is ordinary mini-buses with only 1 or 2 stops (ie, they do not pick up passengers along the way except in municipalities they're destined to make a short stop-over) that charge also around P1.00/kilometer per passenger; hence, these mini-buses run faster. And fourth is "economy fare" ordinary buses that also pick up passengers along the way but charge only around P0.60/kilometer per passenger.

The first 2 types of services are standard in most bus lines in Luzon and other parts of the country. The third is in response to vans (air-con and non-air-con) run by small and independent operators that attract direct passengers in a hurry to go to their destination (say Bacolod City, the provincial capital). And the fourth is in response to mini-buses also run by smaller bus operators that charge low fares to attract passengers.

This mixture of bus services are beneficial to various types of passengers. Poorer ones take the Ceres "economy fare" buses or the other low-fares competitors. Those in a hurry take the 1-stop and 2-stops mini-buses or their competitor vans. This is one proof that what we need are more competition from private producers and suppliers (of transpo, food, housing, other goods and services), and less government regulation and taxation. Government taxation, like franchise tax for all types of public vehicles (buses, mini-buses, jeepneys, taxis, fx and vans, tricyycles, boats, airlines, etc.) immediately jack up the cost of providing public transportation. Not only the tax itself but the bureaucracy and corruption associated with getting the franchise. And this is one argument why franchises (or government-mandated monopoly and oligopoly in various services and utilities) and franchise tax should be abolished.