Differentiated subsidy mechanism for promoting construction and demolition waste recycling

Abstract

Low acceptance of recycled materials and inefficient government policies remain to be great challenges to promote construction and demolition (C&D) waste recycling. However, limited efforts have been devoted to evaluating the effectiveness of government subsidies in improving enterprises profits based on varying consumer quality perceptions. A differentiated subsidy mechanism is therefore developed through game models by investigating the decisions of three parties (i.e., the building materials enterprise, BME; the waste recycling enterprise, WRE; and the government). The results reveal that as consumers show diverse quality perceptions on recycled materials produced by different enterprises, differentiated subsidies should be accordingly imposed between enterprises to increase subsidy efficiency in the cooperation market. Moreover, higher consumer perception could be a partial substitute for government subsidies to promote C&D waste recycling. Although a win-win situation could hardly be achieved to simultaneously maximize the profits of BME and WRE under government subsidies, the enterprise producing higher quality materials (i.e., BME) would profit more from C&D waste recycling all the time. Consequently, when the target quantity of recycled materials is relatively low and consumers show a small disparity of quality perceptions, raising consumer quality perceptions rather than blindly increasing production quantities is a critical approach for BME to increase its profits in the cooperation market. The findings advance existing literature by establishing a differentiated subsidy mechanism that would vary based on consumer quality perceptions. Also, this paper reveals the importance of higher consumer perceptions and the impacts of differentiated subsidies on promoting waste recycling and subsidizing efficiency.