I'm no economist, but the economic arguments here don't really convince me.

First off, you didn't explain how a monopoly is superior (or inferior) to an oligopoly for the consumer. In fact, you didn't really explain how an oligopoly is worse for the consumer than a more competitive market.

Next, your argument about the membership and the application process doesn't really argue much of anything. A lot of competitive markets require a screening process: real estate buying, apartment renting, car buying, employment, building contracting, college applications, etc. The application process doesn't necessarily make it less competitive. Even your cell phone example says that there's competition among providers.

I see what you're getting at, and yes, the factors you point out do make it slightly more difficult for competitors to enter the market and for consumers to choose freely. But that doesn't mean that there won't be competition. Hell, gyms have a high barrier to entry (professional staff, equipment) and make it difficult for consumers to switch (membership fees, long-term contracts, applications), but competition is pretty fierce.

by Tim on Aug 24, 2011 3:24 pm • link • report

It all depends on whether you see car-sharing as a commercial enterprise, or an integral part of the region's transportation network. Having multiple companies creates inefficiencies in the system, which are bad for the customer.

I see car sharing as a part of the transportation options. It should not be run as a commercial business. It should be run as a non-profit, with the goal of providing the best possible transportation service for the lowest possible price.

by Jasper on Aug 24, 2011 3:40 pm • link • report

Many of us are old enough (above 25) to rent cars on ocassion. We also note that there are a variety of vendors and options - including differences in price between rent a wreck and VIP cars -- available from those companies. Would there be "efficencies" in cost if there were only one or two rental car companies? Almost without a doubt. Would those "efficiencies" be shared with consumers if there were only one or two rental companies -- probably not. It does not follow from your statements that either a monopoly or oligopoly is better for consumers in a regional transportation network. As a general rule, i would prefer to have more rather than less choice. Early market makers can demonstate the value to consumers and return to investors. They are not likely, however, to maintain hold of the markets beyond a demonstration period. That is unless they can create artificial barriers to entry -- no bid access to scarce publically funded parking spaces to locate vehicles; exclusive contracts as a result of influence and or funding to political leaders, etc. Ask yourself -- were we better off when only Ma Bell could provide telephone service? Were consumers better off when IPhone was ONLY available on AT&T? If this market is different, why?

by Tom M on Aug 24, 2011 4:13 pm • link • report

I remember when Flexcar merged with Zipcar and most users were actually happy that they wouldn't have to maintain two different memberships. While I dislike the idea of having to become a member or two or more car-sharing services, I guess it will all come down to availability. However, I hope new service providers will provide alternative services such as focusing more on all-day hires or services where you don't have to return the car to the same spot you found it.

by Adam L on Aug 24, 2011 4:36 pm • link • report

I think this is done in a few markets (electricity?), but what if there was a way that the large investments in infrastructure could be levereged through some level of standardization and sharing agreements. Perhaps a third-party company could offer a subscription that enabled access to a number of different providers. Alternatively, like the metro compact, I have a single company and some level of standardization so I could have a single pass that would let me use cars from each company. It'd be up to the providers to provide me with the cars I want, in the locations I want, for the right price.

by Ryan D on Aug 24, 2011 4:39 pm • link • report

@Tom M
Ask yourself -- were we better off when only Ma Bell could provide telephone service? Were consumers better off when IPhone was ONLY available on AT&T? If this market is different, why?

Well, the difference is that those are all examples of non-rivalrous goods, but carsharing is rivalrous. Telephone service, once the infrastructure is in place, is basically infinite, and the network is set up so everything is connected. More people buying phone service doesn't diminish my service, and people on one service still have access to the entire network.

Multiple companies with locked-off access competing for pieces of a finite pie means that either things will be inefficient for consumers (lower density of the cars that you have access to) or inefficient for the companies (companies maintain car density but have a smaller slice of consumers paying into their service so they lose more money than before.)

As Adam L says, companies will have to differentiate themselves somehow. Either through the service they offer (all-day, point-to-point) or through the locations they serve (cars from different companies will be clustered in different areas of the city.)

by MLD on Aug 24, 2011 4:49 pm • link • report

First, you are using the terms incorrectly. A rival (subtractable) good is a good whose consumption by one consumer prevents simultaneous consumption by other consumers. What holds for a single car does not hold true for a car sharing service. Consider for example that telphone monopolies long argued that the number of phones plugged in to houses was limited but costs of providing more than one system to serve them are high. As such, they argued it was inefficient to provide more than one set of lines or services in the same territory. Why would rental cars be capable of supporting multiple vendors but shorter term car sharing companies be a totally different structure? It does not logically follow. This is not about the "potential efficiency of monopolistic providers". There is no doubt that a monopoly is likely to have lower costs. But market power means that they are the only game in town and set prices that will attend to investors but not to consumers' best interests.

by Tom M on Aug 24, 2011 5:01 pm • link • report

I see carsharing as a key part of the regional transportation network and feel that the service offered should resemble that of a transit agency or a public utility. I.e., that the entire regional carsharing fleet (or telecommunications network) should be available at all times to anyone. (Of course, carsharing is not a public utility because we can't have unlicensed, reckless drivers in the system).

This doesn't mean that there has to be one monopolistic carsharing service in a region, but it does mean that membership costs should be free or minimal so that the public can take advantage of the entire regional carsharing fleet. The ability to get a carshare vehicle at the last minute is critical to attracting customers and the more cars available to the public, the more likely customers are to join the system.

When I lived in Philly, I was a member of two carsharing services - PhillyCarShare and FlexCar/Zipcar. This gave me access to the consumer benefits of competition (more aggressive pricing) but I still had access to every carsharing vehicle in the Philly area. This only worked because both companies offered a free or very low-cost monthly membership. The providers were differentiated by two key factors - vehicle cleanliness and pricing models. PhillyCarShare was cheaper by the hour, but the per-mile rate kicked in as soon as you moved the car. Zipcar was more expensive per hour but you got the first 180 miles free. If I was running around the corner for an errand or visiting in-laws for hours in the suburbs, I'd use PhillyCarShare. If I was driving far away for a quick meeting, I'd use Zipcar. Because of the low cost of membership, I was able to take advantage of all of the carsharing available in the region and choose the best provider for my needs on every trip.

If there's going to be competition in DC carsharing, it will only work to the user's advantage if they can take advantage of all of it. That's why a monopoly is not necessarily a bad thing in carsharing, but low membership fees may be a decent substitute.

by KG on Aug 24, 2011 5:06 pm • link • report

Whoops - I meant to say "low membership fees among multiple carsharing providers may be a decent substitute".

by KG on Aug 24, 2011 5:14 pm • link • report

Of course, like every other good thing, the city has gotten it's greedy little hands on it. Here comes a messy system that will cost residents more and give a leg up to the big biz people.

The Boltbus will now pay a fee at Union Station... hello $65 bus rides.

I am sick of this city taking every last penny for every last thing. I don't have a car here, that is best... cut me a break and help keep prices low for car sharing.

Plus, isn't Philly's non profit?

by Mike on Aug 24, 2011 6:42 pm • link • report

@ Mike: I am sick of this city taking every last penny for every last thing.

Doesn't the city provide Boltbus with a curb and a stop place? Why not charge for that? Why would non-user tax payers be charged for that facility?

by Jasper on Aug 24, 2011 7:50 pm • link • report

@Mike - Never underestimate DDOT's ability to find a fee for just about anything and everything. All in the name of regulating public space, of course!

by Fritz on Aug 24, 2011 9:02 pm • link • report

@Mike

PhillyCarShare WAS non-profit until a few weeks ago. I haven't followed the situation closely, but I believe Enterprise has recently bailed out the organization. I think the current situation was due more to specific conditions at PCS than the business model - particularly in terms of growth a few years ago. San Francisco and other cities still have large non-profit carsharing services as far as I know.

by KG on Aug 24, 2011 9:09 pm • link • report

Who cares. The service is a rip off anyways.

by beatbox on Aug 25, 2011 8:48 am • link • report

@Jasper Because sometimes, just sometimes, the city ought to think of doing something for the public good. I have to contend with a million people every weekend in Adams Morgan coming here from the suburbs to party... they park in my hood for FREE.

Rental by the hour cars HELP the city, as they reduce the number of cars on the streets. Start charging out of towners to park on the streets and then I'll be more open to these companies having to pay more. Oh wait, these companies will NOT pay more, the CUSTOMERS (you know, the RESIDENTS) will pay more.

by Mike on Aug 25, 2011 9:48 am • link • report

What I'm wondering is why competitors would even enter the market if Zipcar, with all the advantages of incumbency, can't make a profit.

by Dean on Aug 25, 2011 10:13 am • link • report

Dean - Why enter if Zipcar can't make a profit. You do know that profit is revenues net of expenses, right? So if you have either a revenue or expense model diferent/better than Zipcars, you can make a profit when they do not. You might have a different model on either side because zipcar is an initial mover -- market maker. That entails expense in informing consumers, reaching agreements, etc that may not be shouldered by second or third market entrants. Finally, expenses for Zipcars include a return to investors who may be demanding a high rate of return on their initial stakes. I wouldn't blame them if they did. It would seem like rational behavior by an investor to do so. Later market entrants may not have the same financing and return investments behind them. This is basic business model stuff, right?

Mike - when you moved in to Adams Morgan, either the number of visitors was actually lower or you were unaware of them? Seems that this has been a problem for more than 25 years in AM. So perhaps you have lived there since before 1985? Alternatively, the negative effects of residency in the neighborhood have grown much faster than the positive returns/benefits? Or you now that you have locked in the benefits you would like to use public policy to deny them to visitors? Please let us know your preference....

by Tom M on Aug 25, 2011 11:37 am • link • report

Tom,

I guess I should be more specific. Mostly I'm wondering what kind of business model would be so much better than Zipcar's that not only would it be able to turn a profit without car sharing competition (Zipcar's current position), but also be able to turn a profit while charging even lower prices. I haven't heard about any massive incompetence on Zipcar's part, so I can't think up a readily apparent answer. I see no reason why a new car sharing service would have easier access to capital than Zipcar does as well. "Basic business model stuff" doesn't have investors giving a discount to a new entrant in a money losing market with strong network effects without a pretty good reason. I'm curious as to what that reason is.

by Dean on Aug 25, 2011 3:14 pm • link • report

Hi Dean,

From what I heard on NPR (so you know it's legit), it sounds like Zipcar isn't turning a profit because they have been expanding their fleet like crazy. To get people interested in a new city, they need to have a decent number of cars out there, plus more staff and bikes for those staff. They are moving fast to grab market share so that they will make crazy profits someday. I'm already amazed how many places I can go and then have a Zipcar waiting for me there. I took a Zipcar to the Grand Canyon. That was nuts.

That being said, it sounds like the competitors are probably people who already have the resources to compete--probably existing rental car companies or car share companies from other places. If they have a diverse set of services or markets, they might not need to make a profit for a while. They just want to slice of the dangerously delicious DC pie. All these guys are jostling for position so that as more people give up cars in the cities, they can stand to make an awesome profit.

I do wish Zipcar would stop whining so much about competitors coming to the DC market. Seems like they need to man up and deal with it. They have had years to gain some ground in DC with no opposition and cheap or free on-street parking.

I for one welcome our new car sharing overlords. I just need a new man purse to carry around all these damn membership cards.

by Austin DC on Aug 25, 2011 3:53 pm • link • report

A new year brings new choices: Hertz on Demand now has its first curbside car in DC, a Chevy Malibu at 14th & N. Car2Go is now accepting local members, although it doesn't seem to have actually launched yet. Looking forward to a report once it does!

by Payton on Jan 12, 2012 12:13 pm • link • report