Price regulation for waste hauling franchises in California: an examination of how regulators regulate pricing and the effects of competition on regulated markets
Year: 2011
Type: dissertation
Abstract: In over 80% of California cities, waste disposal services are provided by private\ncompanies operating under monopoly franchises granted to them by local jurisdictions.\nIn all cases, the franchise-granting entity � usually a city � sets waste disposal prices.\nThis dissertation examines the methods used by cities to set prices, the motivation of\ncity/regulators in using these particular methods, whether these methods are successful in\nkeeping prices close to marginal costs and � when they are not successful � why this is\nso. What will be shown is that in setting prices, cities seldom use competitive bidding.\nInstead, cities have developed a complex set of metrics and algorithms to routinely adjust\nprices, which are termed �price adjustment systems.� Using a model based on the work of\nStigler and Peltzman, it will be argued that these price adjustment systems are not\nexamples of �regulatory capture� but instead reflect the actions of a benign regulator\nendeavoring to align prices as closely as possible to the franchisee's costs. Finally,\ncommercial waste disposal prices set by cities will be compared to those set in\ncompetitive markets. It will be further argued that the wide variation in franchised\ncommercial pricing, relative to market rates, correlates with the competitive waste\nhauling environment in the area where the franchise-granting city is located. The more\ncompetitors that are present, the lower the rates. In other words, even regulated markets\ncan be �contestable� in the Baumolian sense, and as in competitive markets, the presence\nof potential competitors has the effect of minimizing prices.
Author: Steven A. Seltzer
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W322351484