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Microeconomic Concepts - Effects of Privatization of the London Underground.

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Introduction

Business Economics - Microeconomic Concepts Effects of Privatization of the London Underground This essay aims to identify the business objectives of The London Underground, a public sector transport group that provides transportation services to the public within London, the potential changes to the business objectives if it were to be privatized. The London Underground, otherwise know as the Tube, is a public sector organization that is a publicly-owned part of the British mixed economy. The Tube is owned and controlled by the government and is a monopoly which takes advantage of economies of scale by being the sole provider of underground rail services to the public. This is supported by London Underground's stated mission; "...to open London's rich potential to all by delivering a dynamic public service that puts customers first." (http://tube.tfl.gov.uk) Being a public sector company the London Underground is subsidized by the government, which is funded by taxation. ...read more.

Middle

As the London Underground becomes partially privatized many new opportunities for investment and improvements in the service may arise. This is due to items such as competition, lower levels of government interference and more efficient organization. Although the London Underground will remain a monopoly as the only underground transport provider, the PPP is a consortium of private companies who each have a share and so, in theory and the government hopes, there will be competition amongst these companies to gain a bigger share by competing for things such as efficiencies or providing a better service. This may result in a greater choice for the public on pricing structures and ticket prices as well as better levels of service. Governments are notorious for red tape and interference, with privatization there will be less of this and so management will be able to act in a way which furthers the interests of the company. ...read more.

Conclusion

(http://tube.tfl.gov.uk) This investment and transfer of control, if properly managed, will improve the quality of the trains, underground stations and other services to consumers. There may be a down side to this of increased ticket prices as the private companies will want to recoup their investments. Privatization of an integral public service such as the London Underground could have repercussions for the users. Public sector monopolies operated by the government are there for the benefit of the consumers, private sector companies will run the services for a profit, although his has its benefits it is important to ensure that the consumer is not taken advantage of. Particularly in the case of the PPP part privatization of the London Underground where the government is still footing the majority of the bill. For these reasons it would be necessary to establish appropriate consumer watchdogs to ensure good services are provided and service targets are met. ...read more.

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