How to Control Waste Incineration Pollution? Cost-Sharing or Penalty Mechanism—Based on Two Differential Game Models

Huijie Li () and Deqing Tan ()
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Huijie Li: School of Economics and Management, Southwest Jiaotong University, Chengdu 610031, China
Deqing Tan: School of Economics and Management, Southwest Jiaotong University, Chengdu 610031, China

Decision Analysis, 2024, vol. 21, issue 2, 91-109

Abstract: This study explores whether the government should implement a cost-sharing or penalty mechanism to control waste incineration pollution and investigates which policy can best incentivize incineration plants to invest in pollution control. We design two differential game models, one based on a cost-sharing approach and one on a penalty system, to model the interactions between the government and incineration plants. We then compare and analyze the equilibrium outcomes in both scenarios. Our findings reveal that when incineration pollution significantly impacts the government, both the cost-sharing and penalty mechanisms are effective in stimulating incineration plants to enhance their pollution control efforts. However, when incineration pollution significantly affects the incineration plants themselves, the cost-sharing mechanism proves to be more effective in terms of pollution control. Furthermore, we find that the government derives greater utility under the cost-sharing mechanism compared with the penalty mechanism, especially as the amount of municipal solid waste (MSW) increases. In contrast, incineration plants tend to generate higher profits under the cost-sharing mechanism. These findings and their accompanying managerial implications may provide valuable guidance for government agencies in formulating policies to manage incineration pollution and encourage waste incineration plants to invest in improving their pollution control systems.

Keywords: municipal solid waste; waste incineration pollution; cost-sharing mechanism; penalty mechanism; differential games (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ordeca:v:21:y:2024:i:2:p:91-109

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