Overwhelmingly however it's cheaper to vertically integrate, and private operators have no interest in taking low profitability routes (which can often be very important for second order reasons).
I will contend that automated busses might change things here a bit though.
No. The public transport authority keeps doing exactly the same that it's doing now. Simply, taxi drivers can choose daily to start following a route for shared drives. Nothing else, except maybe some coordination so that the ticket price is known in advance.
On a smaller bus line with less frequency than that, it will also not be really profitable for "independent" drivers.
It may be useful as a temporary solution or a local test but a public transport authority (should) have enough data to scale lines or create routes based on real usage.
When public transport are bad, it's rarelly due to the physcal constraints but always because budget is lacking. You aren't going to solve your lack of bus (drivers) by adding more vehicules with less capacity.
I'm told (but have no idea of how true that is, since my social circles don't intersect it) that New York has a cottage industry of private bus-vans, that sit somewhere between a taxi and a vanpool that get people (usually working poor) to and from work.
I'll concede geography limits are a valid reason for smaller modes of transport.
They are also cheaper to buy, clean, and maintain.
I'm not sure the cheaper argument actually works out in other areas though. If due to peak capacity requirements you have to buy and operate two minibuses vs one full sized bus then that one full sized bus is going to be cheaper to maintain/clean/etc.
However if it's a low utilization route then for sure a minibus is a no brainer. Seems we see that model deployed in a lot of locations referenced above (excluding dollar vans etc, which I see more as a failure of the state tbh).
[0] https://citylimits.org/how-nyc-dollar-vans-are-adapting-for-...
Important to note that this was fully private and unregulated.
For example, in Scottsdale there are old-timey "trolleys" which look like streetcars, but they are just buses with fancy chassis. They operate routes which go through some neighborhoods and commercial districts, such as Old Town, to get people shopping and gambling and attending events.
In Tempe, there are "Orbit" buses which mostly drive through residential neighborhoods. They are mostly designed to get riders to-and-from standard bus routes and stations. You can also do plenty of shopping and sightseeing and day-drinking on these routes.
In Downtown Phoenix there is a system of "DASH" buses which, among other things, have serviced the Capitol area, which is due west of the downtown hub, where buses fear to tread, because it is also the site of "The Zone" where the worst street people congregate and camp-out.
Now all of these free circulators tend to be popular with the homeless, the poor, and freeloaders, but they are also appreciated by students and ordinary transit passengers, because we need to walk far less, and there are far more possibilities to connect from one route to another.
An innovative feature of many circulators is the "flag stop zone". Rather than having appointed stops with shelters, signs or benches, you can signal the operator that you wish to board or disembark, anywhere in the zone. The operator will stop where it's safe. While it is still a fixed route, it gains some of the flexibility for the passengers to make the most convenient stops.
Firstly, more people riding circulators equals more stimulation of the economy, via shopping and event-going. People getting out of their homes and out of their residential neighborhoods is an overall good for commerce.
Secondly, I believe that one of the issues for collecting fares is the reluctance to create a new tier. Because the circulators are not full-size, full-service bus routes, they would necessarily need to charge less fare, and setting that up and maintaining a lower fare tier is labor-intensive, and requires a lot of education of the public. If a bus runs around the neighborhood with EXACT FARE REQUIRED and people are out of quarters, well they're just going to forgo riding that bus. If a bus is fare-free, and gets them into the full-fare zone, they're going to go for it.
Edit: Bisrepita shared the info: https://en.wikipedia.org/wiki/Public_light_bus
In my experience, red tops can do almost anything they want -- they can deviate from the planned route in any way that they wish. Also, most only accept cash (is this changing?). Green tops are pretty strict about stops and accept cash or local metro card (Octopus). On a deeper, urban explorer level: The red tops have waaaaay more aggressive drivers. It feels like GTA sometimes.
When riding a mini-bus, you only need two words of local language (Cantonese) to make it stop: 有落 jau5 lok6 ("yau-lok"). (You need to really shout to be heard over the revving engine.) For green top routes, use Google maps. They will guide you on what green top to take. Example: If you want to go hiking in Sai Kung, take the 101M green top mini-bus from Hang Hau metro station to Sai Kung pier. (Google maps can provide directions with the bus info.) Red tops are more adventurous and should only be taken if you speak/read more than a few words of Canto (50-100 words is fine).
Now if we get Waymo style self driving minibusses, that'd be great. But if the running costs for full size electric busses aren't too dissimilar it might just make sense to standardize on larger automated busses for increased surge capacity.