Tuesday, June 04, 2013

How a market works

The landscape company I use bills me on a fee-for-service basis.  I get billed for every time they cut the grass. Sometimes, I think they cut it too often.

I guess I could offer to pay them a monthly retainer (global payment) instead, but then they would have an incentive to not cut the grass often enough.  Also, during the dry summer months when the grass doesn't grow, I would be paying them for nothing.

Or I could not have them on contract at all and call them when I need them, but they might not be available.  Then, I would have to spend time shopping around to see who is available at that time.

Or I could buy a lawnmower and cut the grass myself, but then I would have to use time I'd rather spend refereeing soccer games or doing something else.  Plus, I like the idea that I am helping to provide jobs in my community.

Or I could dig up the lawn and plant ground cover instead.


Scott Dolan said...

Enjoyed the post. Will save it for the next time I teach a course on organizations for a good practical example.

It's also interesting to think about the relationships/networks you've built with a landscape company and why you wouldn't be search the market for the (optimal) lowest price. Or what might cause you to search for new provider and when?

Nikhil Bhojwani said...

You could pay for outcomes and pay for the # of days the lawn is within some agreed parameters and penalize them for days in which it isn't.

Paul Levy said...

Do you work for the government?

Grant said...

Or your community board could use the collective bargaining power of your neighbourhood to ensure a reliable supply at a good price and agreed service levels, recognising that lawn maintenance is a community good, not just an individual discretion. Quite a lot like health, really, where a collective approach strengthens the efficient delivery of outcomes.

Aditya said...

Or, you could join an employer sponsored grass insurance. Your co-pay would be$5 per-visit. The grass cutting company would bill the insurance company for the "diagnosis" and/or "procedures" and their associated severity. They would document everything to support their charges in a meaningful cut compliant system (for which the government would have paid incentives to implement). The grass cutting company would also have to protect themselves from malpractice, in case their cutting the lawn to short or to long caused you emotional distress that only a few millions could alleviate.

The grass cutting company would need to submit the claims to the grass cutting insurance company, which would check it for 100 different checks and authorizations, including a cutting necessity review with their specially trained grass experts.

Aditya said...


If you happened to have used an in-network grass cutter, you should hear no more. But heaven forbid if you had used an out of network grass cutter - the cutter would bill you for $200, which is their published rate.

Of course, all transactions would be subject to Grass Insurance Privacy And Accessibility law.

This is how the healthcare market works. I am sure we can figure out a way to make the grass care market become as efficient, in the interest of greater public good.

Dennis Byron said...

But at least you have all these choices regarding how you want to keep your yard. If you lived in one of those other places that speak English, you would have to live with whatever the National Lawn Service gave you (or do they call them gardens?)

Michael Pahre said...

You could switch to organic maintenance on your lawn and only have to cut it half as often. And you'd have half the dilemma.