International Review of Waste Management Policy - Department of ...

Table 3-1: Potential Market Failures in Irish Waste Collection Services
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29/09/09
Market Market Failure Failure
Relevance Relevance to to Irish Irish Waste Waste Management
Management
Market Power (the ability of an
incumbent to alter the price of a
service)
Network externalities (the use of a
service by a customer changes the
value for other users)
Imperfect Information
Externalities –
Environmental/Consumption/Other
Regulatory Capture (when the
regulatory body operates in favour
of one particular interest group)
Government Failure
The local authorities could potentially exercise
market power in their dual role as regulator and
supplier.
Incumbents may make market entry difficult by
manipulating prices to ensure they maintain a
captive market.
Inefficiencies may occur due to the provision of
services by several operators in one area, and the
varying take-up rates of the services on offer.
Collection services exhibit economies of density
which are denied if multiple operators do compete in
the market
Full information is not available to the consumer
regarding the quality of the waste collection service,
resulting in imperfect information in the market
Prices do not fully reflect the externalities associated
with waste, so prices will not convey appropriate
incentives to consumers.
Local authorities have the power to regulate the
market and may use this power in support of their
own interests.
It could be argued that the local authorities have
failed to adequately account for the needs of service
users.
The Competition Authority also gave a large number of examples where competitive
tendering appeared to generate economic benefits: 78
� Kemper and Quigley (1976) estimates for the U.S. that competitive markets
are 25% to 36% more expensive than a single collector, and that contract or
78 The Competition Authority (2005) Decision of The Competition Authority (Case COM/108/02)
concerning Alleged Excessive Pricing by Greenstar Holdings in the Provision of Household Waste
Collection Services in Northeast Wicklow, 30 th August 2005, available at:
http://tca.ie/search.aspx?SearchTerm=e/05/002