This is classic Armchair stuff.
Could the products actually be different? For example 1 firm might give
large trash cans to its customers for $25 - while another gives small trash
cans for $12 - then households self select (though this does not explain
why 1 firm doesn't offer both of these deals, or charge by the pound or
container).
Also, there are 2 puzzles here - how did the world get this way, and why
doesn't it "revert" to what we would expect.
At a minimum, one would expect the firms to organize themselves within the
neighborhood (you take this street, I'll take that one) to take some level
of advantage of scale economies described.
>From the existence of the flyer it sounds like the situation with many firms
has been persevering for some time...
(Are you sure the student didn't make this up?)
-----Original Message-----
From: Andrew Sellgren <[EMAIL PROTECTED]>
To: [EMAIL PROTECTED] <[EMAIL PROTECTED]>
Date: Thursday, November 02, 2000 4:52 PM
Subject: garbage collection
>
>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.
>
>
>---------------------------------
>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
>---------------------------------
>
>
