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Take garbage hauling. You have five haulers running the exact same routes through town, stopping at different houses. Government is unhappy with the tremendous

by ip26 13d ago

Take garbage hauling. You have five haulers running the exact same routes through town, stopping at different houses. Government is unhappy with the tremendous added wear on the roads from the redundant trucks, and the extra traffic, so it strikes a deal and grants exclusivity to one hauler. This is a granted monopoly. It has real positives, such as the same service at 5x less road wear. It should also be obvious that to be positive overall the deal needs to prevent abuse of the public.

anamax 13d ago
Nope. If there are 5x as many truck runs, the trash per truck is 1/5th. The more likely result is that each of the providers runs far fewer trucks than a single provider would because trucks and drivers cost money. Unless the 5 companies figure out how to get the total revenue to 5x, they can't pay for that. Let's do an example. Suppose we have a street with 100 houses and it takes 5 houses to fill a truck. Therefore, it will take 20 truck runs to collect that street's trash. If there is only one trash company, it will need 20 truck runs to service that street. If there are five trash companies, each with an equal share of those 100 houses, each of those companies needs only 4 runs to service its 20 houses. Why would any of them do more runs? Yes, the average distance per run may be higher for the 5 companies, but it won't be 5x.
- tanseydavid 12d ago
  Now do Amazon deliveries. I'm only half-joking.
IAmBroom 12d ago
Some part of Ohio functions as a granted monopoly for the power company. They are given 5-year contracts, but an agency exists to tabulate complaints, reaction time to outages, and so on. If they don't impress the agency near the end of their contract, it will be opened up for market bidding. Because of this pressure, the monopoly power company has even been known to reduce rates, proving a priori that they are indeed serving the public interest at a commendable level.

by ip26 13d ago

anamax 13d ago

Nope. If there are 5x as many truck runs, the trash per truck is 1/5th. The more likely result is that each of the providers runs far fewer trucks than a single provider would because trucks and drivers cost money. Unless the 5 companies figure out how to get the total revenue to 5x, they can't pay for that. Let's do an example. Suppose we have a street with 100 houses and it takes 5 houses to fill a truck. Therefore, it will take 20 truck runs to collect that street's trash. If there is only one trash company, it will need 20 truck runs to service that street. If there are five trash companies, each with an equal share of those 100 houses, each of those companies needs only 4 runs to service its 20 houses. Why would any of them do more runs? Yes, the average distance per run may be higher for the 5 companies, but it won't be 5x.

tanseydavid 12d ago
Now do Amazon deliveries. I'm only half-joking.

IAmBroom 12d ago

Some part of Ohio functions as a granted monopoly for the power company. They are given 5-year contracts, but an agency exists to tabulate complaints, reaction time to outages, and so on. If they don't impress the agency near the end of their contract, it will be opened up for market bidding. Because of this pressure, the monopoly power company has even been known to reduce rates, proving a priori that they are indeed serving the public interest at a commendable level.