One of my students came to me with a puzzle. In his community, garbage
collection is a fairly competitive industry. New residents are given a
flyer listing 15 different collection companies. They generally charge
about $15/month for one collection per week.
Why are there so many collection companies? It would seem like there
would be economies of scale. For example, we could compare the costs of a
monopoly to the costs of an ``average'' competitor above. The competitor
on average travels 15 times farther between stops. This must consume
quite a bit more fuel and take longer, although I would admit that much of
the collectors' time is spent at any given stop.
There is a public-policy puzzle as well: The plenitude of competition
increases the noise in the neighborhood.
Thanks for any ideas.
Andrew.
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Andrew Sellgren
Department of Economics, MSN 3G4
George Mason University
Fairfax, VA 22030-4444
Tel: (703) 993-1124
Fax: (703) 993-1133
Email: [EMAIL PROTECTED]
Web: http://sellgren.gmu.edu
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