Aramark, first and foremost, is not a monopoly. They are a firm, among many, competing in the food services market. They are at Trent University by contract and not monopolistic power. A monopoly is defined in economics as a “price-setting firm being the dominant or sole producer of a good or service.” The attributes of monopolistic markets are “the production of highly differentiated products and the absence of substitutes.”
As there are many firms offering comparable services, their service is not highly differentiable. A substitute is defined as “the positive cross-price elasticity of demand between goods or services.” An example of a substitute is Coca-Cola and Pepsi. If the per can price of Coca-Cola rocketed to $6, consumers would substitute away from Coca-Cola to Pepsi.
We have substitutes. We are all aware of the potential savings awarded to our coffers by choosing the culinary road. We are equally aware of the impossible number, and diverse selection, of restaurants in the downtown core. Choosing to avoid those substitutes, even out of convenience, is your choice and not the design of some supposed nefarious enterprise.
“What about res students? We have to buy Aramark services.”
When you signed your name on the dotted line to attend this institution, you agreed to the terms of the exchange: Trent University elicits your tuition then provides education, residence, and food services. Under no circumstance were you, in any sense of the word, forced into your respective colleges. You had the choice to attend other universities, seek alternate residential arrangements, or refrain from attendance altogether. The availability of substitutes again makes the assertion of monopoly erroneous. Whether or not Aramark puts our balls in a vice at the register is a different story.
Why did Trent University purchase the food services of Aramark? Are they resolved to enrage students to a point of sedition and undermine their bottom line? The answer to the latter is a reasonably obvious “no.” To the former, it is less clear.
I am not privy to the University’s ledger or its condition. But what I do understand is the profit-maximization of firms. If there’s anything Economics has bludgeoned into my hippocampus over the years, it’s that.
Everyone abides the quality of Aramark’s services, but if Trent were to purchase the services of a different firm with better quality, the higher costs associated would be passed to you, the student. Which are you willing to endure? A lower cost tuition with the complement of an inferior menu, or the higher cost with one superior? Trent University is committed to profiting from the production of a quality service for you the consumer. The very example of your reading this piece is tribute to their efforts.
I do not imply our state of affairs is governed by ultimatum. There are aberrant arrangements that could prove beneficial. Is it possible to have prices amenable to student preference whilst generating revenue for the University? Use the Free Market.
Suppose we experimented with the food court model of shopping malls where firms lease space from the owner to sell their goods. Dependent on the contract, payment of pertinent utilities would be the responsibility of individual firms and not the University. If a different firm occupies each lease space, market pressure from price-shopping students would drive the price of food down as anyone dissatisfied could wander to a different vendor. These leasing contracts could provide revenue and, as a corollary, lower tuition. It also gives students more selection.
There are problems; I made the assumption the existing capital is attractive to firms and if not, the renovations required for would yield still acceptable returns on investment. Also, that the potential market is even alluring to begin with. Perhaps the situation of Aramark is simply the best way to satisfy the unique demands of Trent University. Maybe the low administrative costs associated with a one-firm contract are enough to guide Trent to its current position. Perhaps the aforementioned proposal has already been tabled and rejected due to impracticalities listed. As for the board meeting minutes, we are all drowning in ignorance.
If Trent University nullified its agreement to employ a more expensive competitor, someone would whine about increased tuition. In the leasing scenario, as soon as the golden arches stood erect, someone else would find a soapbox to thunder on about the pernicious encroachment of capitalism on post-secondary education. Both positions are about as coherent as a PSY track. It’s time to turn down the volume on a first world problem and let Friedman remind us “[t]here’s no such thing as a free lunch.”