Optimal size in the waste collection sector

The purpose of this study is to analyze the cost structure of a sample of Italian waste collection firms in order to assess economies of scale and density and, therefore, define the optimal size of the firms. A total and a variable translog cost function were estimated using panel data for a sample of 30 firms operating at the provincial level over the period 1991-1995. The empirical evidence suggests that franchised monopoly, rather than side-by-side competition, is the most efficient form of production organization in the waste collection industry. Further, the majority of firms are not operating at optimal scale.