Pedde: Breaking the Monopoly
By Jonathan Pedde, Staff Columnist
Published on Tuesday, April 12, 2011
Dartmouth students have many complaints about Dartmouth Dining Services: The food is too expensive, the food is bland, the service is slow and, to top it off, College administrators make changes without bothering to seek out our opinions. While some of these complaints are unfair, others — especially the first — are entirely valid. Fortunately, the solution to these problems is straightforward: We students should be permitted to spend our Declining Balance Account at restaurants in Hanover.
This reform would lower food prices at DDS locations, foster a stronger Dartmouth-Hanover connection and create greater dining options for students.
First, the economics. DDS is, for all intents and purposes, a public monopoly: The 90-plus percent of undergraduates who live on campus are currently forced to spend a minimum of $1,225 each term at DDS locations. DDS provides reasonable food quality and service but has higher costs. Because of these high costs, DDS prices are high.
Fortunately, there is a simple solution to this problem. A lot of economic research over the past decades has shown that public monopolies become more efficient when exposed to competition. Consider public schooling, for instance. Harvard economist Caroline Hoxby has shown that, when students and parents are given a greater choice of schools, educational outcomes for students who remain at public schools improve while per-pupil public school spending remains constant. Greater competition among schools benefit not only students who change schools but also students who remain at the same public school.
The same concept applies to garbage collection: Benjamin Dachis of the C.D. Howe Institute has shown that when public garbage collection monopolies are exposed to competition, people who continue to use the public garbage collection service receive the same level of service at a lower cost.
The implications of this research for Dartmouth are simple. Given that DDS prices are inflated, increased competition would probably result in some combination of lower food prices and higher food quality.
Second, consider the relationship between Dartmouth students and the people of Hanover. It is in the interest of the College to maintain a good relationship with Hanover citizens. Supporting small local businesses by allowing students to spend their DBA at restaurants in town would further this end.
Finally, many students would directly benefit from greater dining options, even if food prices remained unchanged. I am perfectly satisfied with the variety of foods offered at DDS locations, but I know many students who are not. For instance, DDS does not offer Indian food on a regular basis. As a result, one of my friends who loves Indian food would probably buy food from Jewel of India more often if he could use his DBA to pay for it. Different students have different preferences. While DDS does offer an impressive variety of food, their options do not fill as many niches as Hanover’s restaurants do.
This problem is non-trivial. It is impossible to create an objective ranking of which foods “the typical Dartmouth student” or the general public thinks are best. In economics, this is known as “Arrow’s Impossibility Theorem” — there is no way to aggregate individual preferences into an objective ranking of collective preferences. Even if College administrators held numerous meetings with students and numerous student referendums in an attempt to create the “best” collection of options at DDS locations, the resulting collection of options would not satisfy all Dartmouth students. However, if we could spend our DBA at restaurants in Hanover, we would have a greater variety of options than the College could ever provide by itself.
The administration must end the DDS monopoly by allowing us to spend our DBA at restaurants in Hanover. Our diets depend on it.
Did you think for a minute about, you know, the fact that Hanover restaurants are their own organizations and would not be willing to give up profit just so Dartmouth students can use their DBA there? The Administration wants to make more profit, too, and not provide funds to Hanover restaurants.
This is one of the most poorly founded op ed pieces I have seen from The D.
By ‘14 on Apr 12 | 8:51 am
This is great, Jon!
By Camila Hernandez on Apr 12 | 10:03 am
It is a great thing to see that the minds of undergraduates are susceptible to reason and objective fact. Competition is the best path to the great person, the great education, the great restaurant, the great music…the great everything and the fact that Dartmouth College exists is due to the success in competition of its alums, parents and students. The idea that now that everyone has arrived and Dartmouth College exists means its time to throw away exactly what it is that makes it what it is, is exactly what has been wrong with the College for over 40 years. Everyone who loves the College has a duty to make themselves heard on the point of student freedom in their persons and lives at Dartmouth College to the extent that it is practical. What is the College supposed to be preparing the students for? Is it to go out and commit “Social Justice”? Or is it to pursue our individual happiness which has always proven to benefit everyone rather than forced conformity and leveling which has always proven a disaster at all times and places throughout history.
By Adam Smith on Apr 12 | 2:02 pm
The College receives millions of dollars before the term starts (and before it pays to provide) for students' meals.
The money IS already the College’s…why would it ever make strategic sense for it to allow anyone else to earn it? For the sake of student preference? Is that worth a loss of half a million dollars, or more?
Dartmouth keeps this money, while accruing interest (not necessarily too significant, but still “free” additional money), and then sets up a system where it accelerates the rate of consumption of products (by raising prices well above cost) it deems appropriate.
The business model is ideal; why would it ever consider lowering prices and improving quality in a perfect monopoly?
Pretty sure that price gouging without consequence is the point of a monopoly; this is an even more perfect system because it is mandatory and pre-paid.
By Profit! on Apr 12 | 4:09 pm
Sounds like you just regurgitated a bunch of Econ 2 readings taht you found particularly enlightening…
One point you didn’t even mention: why, exactly, do you believe that Hanover restaurants would prefer to take DBA over cash or a credit card? The transaction costs that come with plugging into Dartmouth’s card system (actually managed through an outsourced service provider) are much higher to the restaurants than the 2 points Visa takes off the top. Plus, the restaurants have all made it this long without taking DBA… I imagine they’ll be just fine continuing to not do so. So again…where is the incentive for the businesses?
By Dan 07 on Apr 12 | 7:12 pm