Becca ello, Massimo; Di Foggia, Giacomo
A icle — Manusc ip Ve sion (P ep in )
De ining he O ganiza ion o Municipal Solid Was e
Managemen Based on P oduc ion Cos s
U ban Science
Sugges ed Ci a ion: Becca ello, Massimo; Di Foggia, Giacomo (2023) : De ining he O ganiza ion o
Municipal Solid Was e Managemen Based on P oduc ion Cos s, U ban Science, ISSN 2413-8851,
MDPI, Basel, Vol. 7, Iss. 2, pp. 1-15,
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P ep en :
De ining he O ganiza ion o Municipal Solid Was e
Managemen Based on P oduc ion Cos s
Massimo Becca ello and Giacomo Di Foggia
Ci able as
Becca ello, M., & Di Foggia, G. (2023). De ining he O ganiza ion o Municipal Solid Was e Managemen
Based on P oduc ion Cos s. U ban Science, 7(2). h ps://doi.o g/10.3390/u bansci7020034
Abs ac : A long-las ing dilemma on he e icien p o ision o se ices o gene al economic in e es
has become inc easingly impo an in he was e managemen indus y: compe i ion o monopoly in
municipal solid was e managemen . P e ious li e a u e has p ima ily examined he economics o
scale and scope o p o ide an adequa e esponse. He e, we con ibu e by in es iga ing subaddi i i y
in municipal solid was e managemen se ice cos s. Subaddi i i y is a c i ical concep used o jus i y
impe ec compe i ion, which encou ages na u al monopolies whe e one p oduce will unc ion
mo e e ec i ely han mo e i ms. To es he hypo hesis ha a subaddi i i y in cos s in was e man-
agemen exis s, we design a simula ion based on empi ical da a o Milan, I aly. We compa ed he
o al p oduc ion cos o he incumben i m wi h he al e na i e hypo hesis buil by di iding he ci y
in o ou a eas and assigning each a ea o a di e en hypo he ical i m. The esul s sugges ha he
exis ence o subaddi i i y esul s in 6% lowe p oduc ion cos s, p ima ily s emming om business
syne gies, lowe ansac ional cos s, and op imiza ion o p oduc i e esou ces and acili ies. The
e idence jus i ies, ce e is pa ibus, ha he p o ision by a single i m is p e e able o mul iple i ms
in he analysis case. Implica ions o policies a e s aigh o wa d. The one- i ule app oach ails o
se he bes condi ion o policymake s o c ea e a le el playing ield anspa en ly and e icien ly
o indus y ope a o s o pe o m e icien ly.
Keywo ds: was e managemen ; cos subaddi i i y; economies o scale; economies o scope; was e
managemen chain; MSW
1. In oduc ion
Municipal solid was e managemen has become a majo mul idisciplina y opic and
has gained e en mo e ac ion in en i onmen al economics [1,2] due o i s p ominen ole
in he ansi ion owa d ci cula ci ies. No wonde in e es in how o iden i y he mos
cos -e ec i e o ganiza ional o ms has inc eased backed by ci cula economy a ge s.
Al hough i may appea linea , he e a e s ages and coo dina ion complexi ies ha
cha ac e ize i . A di ision in o wo consequen ial s ages ha di e echnically and eco-
nomically can be used o simpli y unde s anding. Fi s , a he was e collec ion s age, he
sepa a ion o unso ed and so ed was e akes place. Second, he ea men and disposal
s ages a e when ecyclable was e is ea ed and esidual was e is disposed o [3].
Conce ning coo dina ion complexi ies, one should no e ha was e managemen se -
ice con ains a mul i ude o subse ices, including was e collec ion, s ee sweeping,
cleaning, on-demand, o esidual was e disposal se ices; see Appendix A o a axonomy
o hose conside ed in his pape .
P ep in 2 o 16
The key ques ion is: wha is he mos e icien indus ial se ing o his se ice? Eco-
nomic heo y sugges s ha compe i ion is he i s op ion, p o ided ha ce ain condi ions
a e me . A ai , compe i i e en i onmen is also one o he main a ge s o Eu opean leg-
isla ion on compe i ion and public p ocu emen ; see, o example, he Di ec i e
2014/24/EU on public p ocu emen [4]. Howe e , he e may be excep ions o his p inci-
ple, o example, in he case o bene i s a ising om he op imal scale o p oduc ion in a
pa icula indus y.
We in es iga e whe he he se ices o a single i m a e socially p e e able o hose o
se e al i ms. We es his idea empi ically by ocusing on he p oduc ion e iciency o
was e managemen , conside ing possible subaddi i i y in p oduc ion cos s in he ci y o
Milan, I aly. The analysis is de eloped by compa ing a business-as-usual model in which
was e managemen is p o ided by a single i m wi h an al e na i e scena io in which he
ci y is di ided in o ou a eas and ou i ms p o ide he se ice in each o hese a eas.
We add o he li e a u e on indus ial p oduc ion empi ical e idence om a sec o
ha is becoming inc easingly impo an due o i s ele ance o he ci cula economy, pa -
icula ly ega ding he exis ence o subaddi i i y o cos s.
The es o his a icle is o ganized as ollows: we e iew he ele an li e a u e on
economies o scale, subaddi i i y o cos s, and was e managemen e iciency in Sec ion 2.
A e ha , in Sec ion 3, some de ailed in o ma ion ega ding he heo y o cos subaddi-
i i y is p o ided oge he wi h he a ionale o ou hypo hesis building and he esea ch
design. Sec ion 4 con ains he main empi ical e idence. Sec ion 5 discusses he main con-
side a ions and implica ions a ising om he esul s ob ained. Conclusions ollow.
2. Li e a u e Re iew
Gi en he con e gence o a ious ac o s, such as public policies [5] and clima e com-
mi men s, he need o p o ide public se ices in an economic and eco-e icien way is a
ocus in en i onmen al economics [6,7]. Fu he mo e, he end o he global economy is
s essing indus ial s uc u es, especially in coun ies ha depend on he impo o aw
ma e ials. Se e al app oaches ha e been used o in es iga e his sec o . In his pape , we
e iew some s udies ha ha e deal wi h scale and scope dimensions since, o he bes o
ou knowledge, addi ional s udies a e needed on subaddi i i y o cos s— ha is he pu -
pose o his pape .
E icien p oduc ion size and scope and he en i onmen al impac o i ms a e im-
po an o policy and ma ke o ganiza ion [8], and he numbe o ele an s udies on he
cos o was e managemen has inc eased [9–13]. The app oaches used o es ima e cos s o
was e managemen a e o en based on he uni cos me hod, benchma king echniques,
and cos es ima ion models using, o example, cos and p oduc ion unc ion analysis
[14,15] and da a en elopmen analysis and s ochas ic on ie analysis [16].
P e ious li e a u e p o ides many insigh s in o di e en echnologies, scale econo-
mies, ma ke o ms, indus ies, and coun ies [17,18]. Schola s ha e also ied o empi i-
cally assess he impac o di e en egula ed business models on was e managemen e i-
ciency by ocusing on he size o he e i o ial a eas and municipali ies [19,20]. Fo exam-
ple, a ecen pape analyzes municipali ies ha , like o he p oduc ion uni s, should be
la ge enough o minimize a e age cos s [21]. This is consis en wi h he ac ha a enewed
in e es in decen aliza ion has a ec ed local public go e nance a ound he wo ld [22], as
well as a me opoli an scales [23]. Such s udies can assess whe he he scale o ac i i ies
can explain pe o mance in was e managemen [24].
O he s udies ocus on he cos s uc u es o was e managemen [10], he ela ion wi h
exogenous ac o s such as popula ion densi y [25], he need o de elop s a egies o
achie e sus ainabili y a ge s [26], compliance wi h en i onmen al legisla ion and cos s
[27], and ze o was e managemen [28]. Simila app oaches ha e been de eloped o o he
local en i onmen al se ices, such as wa e , whe e s udies sugges subs an ial cos bene-
i s om he join p oduc ion o ea ed quali y wa e [29] and po en ial bene i s o app o-
p ia e scale and scope economies conside ing e ical and ho izon al con igu a ions o
P ep in 3 o 16
wa e indus ies [30]. The inc easing p essu e o cos e iciency has p omp ed go e n-
men s o ans e some was e se ices o p i a e i ms [31], gi ing ise o he ques ion o
whe he o -p o i i ms a e compa ible wi h ou comes ha maximize social wel a e [32].
Economic and poli ical ac o s exe di e en impac s on was e managemen by p i-
a e and public i ms [33]. P i a e was e managemen ope a o s a e no necessa ily be e
pe o me s han public i ms [34] because he p o i maximiza ion ypical o p i a e ope -
a o s may clash wi h he social and en i onmen al a ge s ypical o public se ices. To
his end, business models and was e managemen me hods, such as he o ganiza ion o
collec ion se ices, ha e ecei ed limi ed a en ion [35], e en i hey ha e a signi ican im-
pac [36]. Bo h con ollable and noncon ollable ac o s can ha e a signi ican impac on
cos s [37].
B oadly speaking, a unc ion is said o ha e subaddi i i y when he whole is less han
he sum o wo o mo e pa s. This a ibu e is impo an in economies o scale when he
combined ope a ing cos s o wo en e p ises a e less han he sum o hei indi idual op-
e a ing cos s [38]. Economies o scale ake place when he a e age cos o p oduc ion de-
clines as p oduc ion inc eases. Such a decline in a e age p oduc ion cos can s em om,
acco ding o he sec o , high ixed cos s, lowe inpu p ices, o lea ning economies.
Wha cha ac e izes economies o scale is ha such ela ions ypically ope a e o e a
ange o ou pu a he han o all possible ou pu le els [39]. When economies o scale
pe ain o he i m’s en i e ou pu a he han o a speci ic p oduc , he cos sa ings esul -
ing om making hese p oduc s oge he include a a ie y o economies o scope. Con-
ce ning economies o scope, subaddi i i y o cos s e e s o a si ua ion whe e he o al cos
o ac i i ies pe o med in combina ion is less han he o al cos o ac i i ies pe o med
sepa a ely due o syne gies [40]. Indeed, mul iple p oduc s show scope economies when
he combined cos o p oducing hem is lowe when hei p oduc ion is o ganized join ly
han when i is sepa a e o each p oduc o p oduced by mo e i ms [41].
In a public se ice such as was e managemen ha is made up o many se ices, i is
easonable o hink ha , based on economies o scale and scope, a logic o e ical in eg a-
ion is necessa y, e.g., o ansac ion cos s and in o ma ion e iciencies. Economies o scale
and scope also a ec he public se ice deli e y ma ke s uc u e deba e. Speci ically, os-
e ing compe i ion incen i izes ope a o s o ope a e e icien ly. Howe e , compe i ion in
he ma ke is no always he p e e ed con igu a ion, as he p oduc ion echnology o he
cha ac e is ics o he se ices p oduced can gene a e ma ke ailu es. In some ci cum-
s ances, exis ing p oduc ion echnology makes i mo e e icien o concen a e p oduc ion
on a single subjec han a solu ion in which se e al i ms ca y i ou . In such cases, he
ac i i y is con igu ed as a na u al monopoly. I is ecognized ha municipal was e se ices
ha e ypically been p o ided h ough na u al o legal monopolies [15]. Indeed, se ices
o gene al economic in e es ha e gene al economic u ili y o en subjec o public se ice
obliga ions. Ma ke ules apply o i ms esponsible o managing such se ices as long as
compe i ion does no p e en hem om accomplishing hei asks in he gene al in e es ,
o example, in cases o impe ec compe i ion [42]. The e o e, such se ices can be p o-
ided ei he by he s a e o by he p i a e sec o and by mo e i ms ha a e pa o public
con ac s o in a monopolis ic manne .
Subaddi i i y o cos s is a c i ical concep equen ly used o jus i y impe ec com-
pe i ion, which encou ages na u al monopolies e en i i s analysis is challenging due o
in o ma ion asymme y [43]. We help ill his gap by p o iding a de ailed analysis o he
cos p oduc ion s uc u e by empi ically es ing ou idea using a speci ic business sce-
na io.
3. Ma e ials and Me hods
A gumen s o and agains monopoly and compe i ion in he p o ision o se ices
emb ace many pe spec i es [44,45]. Subaddi i i y assumes ha he ou pu le el is p o-
duced a he lowes cos by a single i m [38]. Economies o scope and economics o scale
a e cons ained ypes o subaddi i i y by compa ing he cos s o mo e i ms ha specialize
P ep in 4 o 16
in p oducing di e en ou pu s o one ha p oduces wo goods a compa able ou pu le -
els. Taking an example o i ms ha p oduce indi idually, he p oduc ion cos equals he
sum o he cos s incu ed by each i m o p oduce a quan i y q o p oduc o se ice x.
Equa ion (1) o malizes his concep , whe e Q s ands o he quan i y and i co esponds
o one o he n i ms exis ing in he indus y. Equa ion (1) indica es ha he p oduc ion
cos o he o al quan i y Q is he sum o he cos s incu ed by each i m o p oduce he
sha e o Q, i.e., Q/n p oduced by each.
𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑐𝑜𝑠𝑡={ 𝑐𝑚(𝑄𝑥); 𝑜𝑛𝑒 𝑓𝑖𝑟𝑚
∑ 𝑐𝑖(𝑄𝑥
𝑛)
𝑛
𝑖=1 ; 𝑛 𝑓𝑖𝑟𝑚𝑠
(1)
The hypo hesis unde lying he heo y o subaddi i i y is esumed in Equa ion (2).
𝑐𝑚(𝑄𝑥)≤∑ 𝑐𝑖(𝑄𝑥
𝑛)
𝑛
𝑖=1
(2)
Na u al monopolies s and ou because ma ginal cos s a e ypically small once an in-
es men is made and because a e age cos s dec ease wi h inc eased ou pu ; i only one
i m ope a es in he ma ke , p oduc ion cos s may be lowe han i he e a e compe i o s.
The s anda d a e age cos unc ions o one o mo e i ms a e shown in Figu e 1.
Subaddi i i y indica es ha i is cheape o p oduce he same p oduc ion le el when only
i m one is p oducing. The exis ence o economies o scale is a su icien bu no equi ed
condi ion o monopolies o be sus ainable. Howe e , subaddi i i y is conside ed neces-
sa y e en i he e a e insu icien condi ions o a na u al monopoly o be conside ed e i-
cien .
Figu e 1. A e age cos s o one and mul iple companies in a monopolis ic ma ke ; Q = quan i y o
ou pu ; AC a e age cos .
We empi ically es ed whe he s a ing om da a on cos s and was e p oduc ion,
Equa ion (3) Ho is e i ied, i.e., i he se ice alls be ween 0 and Q2 in Figu e 1. In such a
case, he collec ion o was e is con igu ed as a na u al monopoly due o economies o scale
and abo e all, economies o densi y, which lead us o belie e ha he se ice cos s a e
lowe i he se ice is ca ied ou by a single i m a he han by se e al i ms. Beyond a
ce ain le el o ou pu , in he case o Figu e Q2, mo e i ms a e able o ope a e mo e e ec-
i ely.
In ne wo k se ices such as municipal solid was e collec ion, economies o densi y
ake on cen al impo ance. To asce ain he exis ence o a ma ke ailu e, i is necessa y
o e i y he condi ions ha make he collec ion phase a na u al monopoly ha canno be
con es ed.
P ep in 5 o 16
A con es able na u al monopoly, al hough no op imal, allows o elimina ing he
monopoly en s and can each he mos e icien alloca ion compa ible wi h he cos co -
e age cons ain in he absence o egula ion. This esul implies ha in ma ke s cha ac-
e ized by ew i e e sible cos s and wi hou o he ba ie s o en y, compe i ion in he
ma ke can p oduce esul s close o second-bes e iciency e en in he p esence o na u al
monopolies. Fu he mo e, si ua ions o ma ke ailu e occu when he goods and se ices
p oduced a e public goods, such as was e managemen , because he ma ke does no eas-
ily allow op imal p oduc ion, gi en he di icul y in p e en ing ee- iding beha io s.
Resea ch Design
Ou esea ch ques ion consis s o es ing he subaddi i i y o cos s in was e manage-
men p oduc ion cos s in Milan. To con ex ualize he analysis, Table 1 p esen s con ex ual
da a ega ding was e p oduc ion.
Table 1. Backg ound in o ma ion ega ding was e in he ci y o Milan.
Yea
Inhabi an s
So ed Was e
Was e
Gene a ed
So ed Was e
So ed Was e pe
Capi a
Was e pe Capi a
Tons
Tons
%
kg/Inhabi an
kg/Inhabi an
2020
1,397,715
381,660
608,413
62.7
273.1
435.3
2019
1,406,373
433,404
707,507
61.3
308.2
503.1
2018
1,395,980
407,318
692,228
58.8
291.8
495.9
Sou ce: I alian Na ional En i onmen al P o ec ion Ins i u e.
The was e managemen incumben uns he se ice bo h in he Municipali y o Milan
and in se en een o he owns in he Milan me opoli an a ea. Table 2 con ex ualizes he
scope o he incumben o ca ying ou he case s udy; indeed, he incumben i ms un
he se ice in he Municipali y o Milan and in se en een o he municipali ies in he me -
opoli an a ea.
Table 2. Scope o analysis.
Va iable
To al
Case S udy
Numbe o Municipali ies
18
1
Popula ion
1844
1400
A ea km2
383
182
Wo k o ce
3097
2444
Sou ce: Own elabo a ion based on incumben websi e.
S a ing om he echnical and economic da a conce ning he municipal was e col-
lec ion se ice in Milan, we eclassi ied he cos o was e managemen o es ou hypo h-
esis. The cos econs uc ion pa h s a ed om in o ma ion made publicly a ailable by he
Municipali y o Milan, and he p ocedu e o de e mining he alues a ibu ed o he ac-
i i ies e e s o he accoun ing and echnical documen a ion: he inancial s a emen s o
he incumben was e managemen i m, he indica o s e e ing o he use and cos o pe -
sonnel, and he indica o s ela ing o he use o capi al goods de i ed based on he se ice
moni o ing ac i i y, as well as by analyzing he se ice con ac .
Based on he abo e in o ma ion, we es ima ed he cos s classi ied as ollows: collec-
ion, sweeping, o he se ices, and on-demand. To e i y he exis ence o subaddi i i y in
he cos s, s a ing om he accoun ing da a, we es ima ed he o e all cos s, hypo hesizing
ha ou i ms an he se ice as in Figu e 2. The e o e, he business-as-usual hypo hesis
o esees ha he o al quan i y o he se ice ha co esponds o he was e managemen
se ice o he en i e ci y o Milan was p o ided by a single ope a o , whe eas he
P ep in 6 o 16
al e na i e hypo hesis o esees ha each o he ou i ms p o ide a ac ion o he se ice
p o ided he o al quan i y is he same.
Figu e 2. App oach o he al e na i e scena io. Ci y o Milan, I aly. Inhabi an s 2020: ~1.4 million,
(me opoli an ~2.9 million). Ele a ion: 130 m abo e sea le el. A ea: 181.76 km2. Sub igu e; localiza-
ion o he Ci y o Milan
Milan is di ided in o nine dis ic s; we did no ake in o conside a ion a scena io wi h
mo e han ou i ms, as he same o ganiza ional measu es could no be gua an eed o
each one. The hypo hesis o mu ual use o p oduc ion inpu s by di e en i ms in he same
ope a ing a ea appea s incompa ible wi h adequa e le els o e ec i eness and e iciency.
Gi en he cha ac e is ics o he se ice and he ci y o Milan, we simula ed by assuming
ou i ms co esponding o he ou incumben di isions. Geog aphically, in Figu e 2 i m
1 uns he se ice in he no heas a ea o he ci y ha is deno ed as a ea 1, i m 2 uns he
se ice in he sou heas a ea, i.e., a ea 2, i m 3 uns he se ice in he sou hwes a ea ha
co esponds o a ea 3, and i m 4 uns he se ice in a ea 4 o he no hwes side o he
ci y. This is due o he ine i able duplica ion o cos s de i ing om ixed cos s and in es -
men s necessa y o he o ganiza ion and p o ision o he se ice o e educed ope a ing
a eas— he educ ion o he unc ional a ea does no co espond o a p opo ional educ-
ion in cos s. The e o e, we assume ha each i m independen ly ca ied ou he se ice
in he assigned a eas. Table 3 p o ides in o ma ion ega ding he ci y o Milan and how
i could be di ided o allow mul iple i ms o un he was e managemen se ice.
Table 3. Reclassi ica ion o he ci y o Milan acco ding o ou scena io.
Adminis a i e Uni s
A ea 1
A ea 2
A ea 3
A ea 4
km2
Pop
km2
Pop
km2
Pop
km2
Pop
km2
Pop
Dis ic 1
9.7
98,679
4.8
49,339
4.8
49,340
Dis ic 2
12.6
163,335
12.6
163,335
Dis ic 3
14.2
145,328
14.2
145,328
Dis ic 4
21
162,795
21
162,795
Dis ic 5
29.9
127,280
29.9
127,280
Dis ic 6
18.3
152,519
18.3
152,519
Dis ic 7
31.3
177,731
20.4
115,525
11
62,206
Dis ic 8
23.7
188,650
23.7
188,650
Dis ic 9
21.1
190,058
10.6
95,029
10.6
95,028
A eas 1, 2, 3, 4 *
37.4
403,692
55.7
339,413
43.5
317,384
45.2
345,884
Milan
181.8
1,406,373
Sou ce: Elabo a ion based on da a a ailable online o he Municipali y o Milan. * Ou es ima ion.
See Figu e 3 o a map showing o e lapping be ween municipali ies and a eas.
P ep in 7 o 16
Figu e 3 o e laps dis ic s and business uni s ha co espond o he a eas used in he
al e na i e hypo hesis.
Figu e 3. Dis ic s and he ou a eas. In ed nine dis ic s, in g een ou a eas
F om Table 3, he popula ion o he ou iden i ied a eas anges om 0.31 o 0.4 mil-
lion inhabi an s, whe eas he a eas ange om app oxima ely 37 km2 o sligh ly less han
56 km2, om which we can de i e popula ion densi ies om 6 o 10 housand inhabi an s
pe km2. We we e able o di ide he cos s be ween he ou i ms conside ing he minimum
o ganiza ional in o ma ion o he pe o mance o he se ice, in e able om he in o -
ma ion in he documen s used by he agency o he ci y o Milan. Appendix A summa izes
he ou ypes o se ices: collec ion, sweeping, o he , and on-demand—mo e han i y
di e en subse ices cons i u e he was e managemen se ice.
We de ine ou hypo heses as ollows:
𝐻𝑦𝑝𝑜𝑡ℎ𝑒𝑠𝑒𝑠:
{
𝐻0=𝑐𝑚(𝑄)≤∑ 𝑐𝑖(𝑄
4)
4
𝑖=1
𝐻1=𝑐𝑚(𝑄)>∑ 𝑐𝑖(𝑄
4)
4
𝑖=1
(3)
Conside ing he hypo hesis o malized in Equa ion (3), we de eloped ou esea ch
ques ion o e i y Ho. In his pape , we ocus on he p oduc ion cos s uc u e.
4. Resul s
Based on he abo e assump ions, a easonable app oxima ion o he o al indus ial
cos o he indi idual ac i i ies ha make up he was e managemen se ice was econ-
s uc ed. I should be no ed ha he o al cos includes bo h he ac i i ies o collec ion and
was e ea men and disposal. Table 4 shows he dis ibu ion and o al cos acco ding o
he simula ion designed o es ou hypo hesis.
Table 4. Business-as-usual and simula ion.
Cos s and Resou ces
Wo k o ce
Means
P oduc ion Cos
Business-as-usual: incumben
2444
761
314,879,379
c(Q)
Collec ion
999
248
157,821,729
Sweeping
1378
498
141,086,581
O he se ices
36
15
13,077,784
On-demand
31
0
2,893,285
Al e na i e hypo hesis: i m 1/4
P ep in 8 o 16
𝑐𝑖(𝑄𝑖
𝑛)
Collec ion
285
70
45,323,303
Sweeping
390
141
40,399,649
O he se ices
16
6
3,981,982
On-demand
17
0
1,328,732
𝑐𝑖(𝑄𝑖
𝑛)
Al e na i e hypo hesis: i m 2/4
Collec ion
260
66
41,894,035
Sweeping
348
128
36,385,046
O he se ices
16
6
3,352,230
On-demand
17
0
1,310,193
𝑐𝑖(𝑄𝑖
𝑛)
Al e na i e hypo hesis: i m 3/4
Collec ion
230
59
39,019,567
Sweeping
328
128
35,136,937
O he se ices
16
6
3,197,337
On-demand
17
0
1,306,381
𝑐𝑖(𝑄𝑖
𝑛)
Al e na i e hypo hesis: i m 4/4
Collec ion
239
61
38,432,266
Sweeping
343
118
34,649,655
O he se ices
16
6
5,249,366
On-demand
17
0
1,289,739
∑ 𝑐𝑖(𝑄
4)
4
𝑖=1
T oal al e na i e hypo hesis: Fi ms 1, 2, 3, 4
2555
795
332,256,419
Collec ion
1014
256
164,669,171
Sweeping
1409
515
146,571,287
O he se ices
64
24
15,780,915
On-demand
68
0
5,235,045
No e: econs uc ion o cos s o p edic he o al cos o se ice unde he wo hypo heses was pos-
sible by accessing in o ma ion con ained in he se ice con ac be ween he Municipali y o Milan
and he incumben , see Appendix B o pa ame e s.
Fo each se ice con ained in he se ice con ac , all he p oduc ion inpu s, including
s a , we e alloca ed o one o he ou ac ual business uni s. Di e ences in cos s p ima ily
de i ed om he ac ha bo h s a and o he p oduc ion inpu s would duplica e by di-
iding he se ice. This conside a ion is o en omi ed in economies o scale s udies al -
hough i is o p ominence.
Table 4 shows ha he ou pu le el is p oduced a he lowes cos by a single i m
p o iding impe ec compe i ion, which encou ages one p oduce since i p obably unc-
ions mo e e ec i ely han mo e i ms. This can be examined by compa ing wo k o ce
and p oduc ion means. Rega ding he wo k o ce, ou esul s sugges ha a monopolis
p oduced he same ou pu as ou i ms, employing 4% ewe employees and equi ing
9.5% ewe means o p oduc ion.
Figu e 4 compa es he o al p oduc ion cos o was e managemen ollowing ou e-
sea ch design hypo hesis. The p oduc ion o a single i m is socially p e e able in e ms o
p oduc ion cos s.
P ep in 15 o 16
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