PI 3.3 Competitive Markets Versus Cartels. Suppose the City of Columbus, Ohio, is considering two proposals to privatize municipal garbage collection. First, a handful of leading waste disposal firms have offered to purchase the city's plant and equipment at an attractive price in return for exclusive franchises on residential service in various parts of the city. A second proposal would allow several individual workers and small companies to enter the business without any exclusive franchise agreements or competitive restrictions.

Under this plan, individual companies would bid for the right to provide service in a given residential area. The City would then allocate business to the lowest bidder.