This paper reports on work undertaken on behalf of the UK Department of the Environment, Transport and the Regions (DETR) to develop a computer-based simulation model of the local bus market to be used to assess the likely outcomes of alternative regulatory and investment policies associated with Quality Bus Partnerships (QBP). Following a review of existing models of public transport, we develop a simulation model with three components, comprising: a demand model, a cost model and an evaluation model. The demand model is based at the level of the individual and assigns people to bus services according to the level of generalised cost of each service and the individual’s sensitivities to cost attributes. The demand model not only determines the market shares for each operator, service and ticket type, it allows for the overall size of the bus market to expand or contract according to the overall level of service offered on the network. The cost model is based on a fully allocated costing system that determines total operating costs as a function of bus hours, bus kilometres and the peak-vehicle-requirement. Finally, the evaluation model estimates consumer surplus, operator profitability, and an overall measure of economic welfare. A demonstration of the capabilities of the model is given with reference to an actual network, where alternative quality and competition scenarios are examined.