Privatization of Public Services: Market Structure, Analysis of Performance and Implications for Anti-Trust

Abstract

97 p.Thesis (Ph.D.)--University of Illinois at Urbana-Champaign, 2006.Privatization through contracting has been promoted as a way for government to control costs, yet many services are still provided through apparently less efficient mechanisms. Researchers have speculated why this should be the case. Others have questioned whether privatization can meet all its objectives, since governments will not achieve cost savings if there is not sufficient competition for contracts. This study examines these questions for the privatization of municipal solid waste employing two new and original data sources: survey of Illinois municipalities and a compilation of firms competing for solid waste contracts. It finds that while the vast majority of cities contract out, but a substantial number supply the service inhouse (8%) or through and the "open" systems in which households choose their waste hauler amongst a number of private firms (30%). The study also found a decline of almost 50% in the number of firms competing for contracts since 1995. City choice among delivery modes was analyzed using multinomial logit analysis and it was found that the most important factors explaining choices were whether the city hosted a waste disposal facility, the age and diversity of the population and the degree of local competition for contracts. The propensity of firms to bid on contracts was also analyzed and it was found that the distance from the firm to the city, the size of the firm, the number of competitors located closer to the city, and whether the firm was vertically integrated by owning a waste disposal facility explained the willingness of a firm to compete for a contract. The predicted probability of bidding across all firms was computed for every contracting city and used to simulate the number of expected bidders over time. This last analysis demonstrated the decline in competition for contracts more clearly than the techniques used in standard anti-trust analysis of spatial markets.U of I OnlyRestricted to the U of I community idenfinitely during batch ingest of legacy ETD