Aaron in Azerbaijan

Just another blog about Azerbaijan.

The Market at Work: Price Controls and Transportation

with one comment

This post is low on academic rigor and high on anecdotal evidence. Also likely high on boring information about transportation from Baku to Lankaran (sorry). Travel from Baku to Lankaran by bus has been curiously difficult as of late, whereas for the first year and a half of my time here, getting to Lankaran from the Baku bus station was never a problem. Recently, including both this week and last week, it’s been difficult to get a seat on the bus. Instead of waiting around for another bus to roll in, I’ve had to take the smaller, non-air-conditioned overglorified vans. There have been long lines awaiting the buses, withe 20-30 people waiting after the big buses are full.

I’m less concerned about the ride itself than I am about why I can no longer get a regular bus from Baku to Lankaran. What’s changed? I think we’ve got two forces here, both having to do with a government-mandated change in the bus service. One has to do with the conditions of the bus ride, and the other has to do with price.

First, the buses have improved. I wrote about that here. We now have larger, air-conditioned buses shuttling back and forth, and this is a significant improvement over the the previous buses which were stuffy and hot, less comfortable. The bus then was not ideal. However, with the government’s focus on tourism lately, the new buses are likely a godsend from those with a stake in Lankaran tourism.

Second, the price for the bus is stuck at 5 AZN. It’s not any more, not any less. And this is probably a price that has come down from above, as well. The powers that be want a cheap, comfortable option for getting to Lankaran. I cannot imagine this would be the market rate, with all of those folks waiting by the bus to get a seat.

So those are the positive signs for bus transportation. Another thing that has happened is that train prices rose drastically. While conditions on the trains haven’t changed, the prices have more than doubled and in some cases increased by more than 150%. That’s a serious price hike. And now the cheapest, most uncomfortable ticket for the train is the same price as a bus seat. And those train spots don’t come with air conditioning. It’s become a pretty reliable event for me to be able to buy tickets the afternoon before boarding the night train. Before the price hikes, I had to get there an hour before the ticket window opened in order to get my ticket.

So now we are left with the over-glorified vans, the marshrutkas. With the buses attracting more people, and the bus price set at 5 AZN, marshrutkas have actually seen an increase in price. It’s now 6 AZN to Lankaran. Why is this? Seems to me that the marshrutka drivers now have to make up for a loss of clientèle due to the new buses. Since the marshrutkas seem to operate outside the (slightly) more regulated world of buses, they can likely charge whatever they need to make sure they are still making a profit. Here’s a great example of a government-regulated market (the buses) side-by-side with a less-regulated market (marshrutkas), causing a strange manipulation of the price structure (pay more, get a lesser service).


Written by Aaron

July 27, 2011 at 2:16 pm

One Response

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  1. I can see the logic in the increase in train fares. I suspect a subsidized bus service [even one that sports fancy air-conditioned ones] is cheaper than a subsidized rail service. All you need to do is make the trains more expensive, thereby “proving” that they are unpopular with consumers. Then in a year or so, you close down the passenger services, moving all passenger services to the [cheaper to subsidize] bus service. Hey, presto, you have “solved” the problem of the unpopular rail service and saved a heck of a lot of money!

    The British did this to about one-third of their passenger rail services in the 1960’s as did the US government before the coming of Amtrak in 1971.

    I don’t think any thought was given to the marshrutkas. It will be left to “market forces” to sort out which survive and which perish.


    July 27, 2011 at 3:32 pm

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