Dynamic Incentive Mechanism Design for Recycling Construction and Demolition Waste under Dual Information Asymmetry

Qidan Hu, Ying Peng, Chunxiang Guo, Dong Cai and Peiyang Su
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Qidan Hu: College of Architecture and Environment, Sichuan University, Chengdu 610065, China
Ying Peng: College of Architecture and Environment, Sichuan University, Chengdu 610065, China
Chunxiang Guo: College of Business, Sichuan University, Chengdu 610065, China
Dong Cai: College of Business, Sichuan University, Chengdu 610065, China
Peiyang Su: College of Architecture and Environment, Sichuan University, Chengdu 610065, China

Sustainability, 2019, vol. 11, issue 10, 1-24

Abstract: The generation of construction and demolition waste (CDW) is a problem for societies aspiring to sustainability. In this regard, governments have the responsibility to support the CDW recycling through subsidies. However, the information asymmetry, as well as the “dynamic nature” of the CDW recycling market, results in a number of barriers for the government to promote CDW recycling. In this paper, we establish a mathematical model that includes the government and the recycling enterprise in the presence of dual information asymmetry including the unknown recycling technology level and unobservable recycling efforts in one-stage and two-stage cooperation. Using the incentive theory, the static and dynamic optimal recycling incentive contracts of the government were designed, and the optimal decisions of the recycler were identified. A numerical simulation revealed that by designing reasonable contracts, the government can encourage the recycler to report the true technical level and achieve information screening. Furthermore, the subsidy of the high-tech recycler remained unchanged under different circumstances. However, the subsidy of the low-tech recycler was closely related to the probability of misreporting and the proportion of technology types. This finding suggests that the government and recycler are inclined towards long-term dynamic cooperation.

Keywords: construction and demolition waste recycling; government subsidies; dynamic incentive mechanism; dual information asymmetry (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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