Market concentration and contracting out a public service – case study of the waste collection and disposal service in the municipalities in Central Slovakia

Abstract

Market concentration of a public service is one of the factors influencing the risks associated with contracting out, as described by the principal-agent theory. A monopoly of the service producer (the agent) creates a space for enforcing the producers own interests but not those of a service provider (the principal), whose interest is to provide the public service effectively. Market concentration therefore affects the effectiveness of contracting out said service. The aim of the study is the identification of market concentration of the waste collection and disposal service as a factor affecting the cost effectiveness of contracting out and the contract management quality in the environment of Slovak municipalities. Market concentration is analyzed through a market concentration index, in this case the Herfindahl-Hirschman index. Findings of this study confirm the existence of a high market concentration of the service in the monitored municipalities.