Auctioning Bus Routes: The London Experience

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Abstract
This chapter presents the format of the combinatorial auction (CA) that was adopted by London Regional Transport (LRT) along with a discussion of its properties. Major options and issues that were faced by LRT when deciding on the auction format are also discussed. The chapter reports on the normative implications of the motivations for submitting a package bid, and provides a discussion of a new method for inferring bidders’ cost structure. It emphasizes that adoption of a CA format for procurement of public transport services in the Greater London area by LRT is the first example of the usage of such format in public procurement. The chapter concludes with a detailed description of the data used in this project together with summary of the statistics, and emphasizes that the LRT auctions have proved to be a success as they have led to improved quality of service and lower costs.

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