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.