The circular quality trap in construction reuse marketplaces: a model-based analysis of information externalities, coordination, and policy design

Song Lin, Wei Zhao, Zixin Wang and Hao Chen

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Construction and demolition waste can be recycled at high rates even when few components are reused for the same purpose. One reason lies in the information needed to trade reclaimed components: suppliers pay for testing, documentation, and verification, while part of the return to credible information is shared across the marketplace. We formalize this underinvestment mechanism as the Circular Quality Trap. We combine Dutch public market context, an illustrative public-page coding exercise, a simulated empirical-design analysis, and a structural scenario model. The coding exercise shows uneven field coverage, especially for price and condition. In the simulated design, independent market coverage is more consequential than listing count alone: a four-year panel with about 3000 listings and 800 potential region–category–quarter cells reaches a 79% detection probability for the specified peer-information coefficient, while a confounded-data stress test shows substantial bias when common cell shocks affect both information and transactions. In the central structural scenario, reuse is 18.5% in the decentralized equilibrium, 23.5% under industry coordination, and 26.2% under the social planner. Policy rankings depend on implementation costs. At a 25% verification-cost saving, shared platform verification exceeds the quality-linked subsidy only while fixed platform administration remains below about 0.007 normalized welfare units. The structural results are illustrative scenario outputs rather than transaction-based estimates.

Keywords: circular construction; circular economy; component reuse; information completeness; platform governance; reverse logistics; sustainable supply chain; verification externality (search for similar items in EconPapers)
JEL-codes: J01 R14 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2026-09-25
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Published in Sustainability, 25, September, 2026, 18(19). ISSN: 2071-1050

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