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.
Highlights
With an accelerated and large-scale urbanisation process, the whole of society has benefited from the construction industry while a great deal of construction and demolition waste (CDW) has been generated
Among the various solutions to CDW problems, recycling of CDW by enterprises provides a reasonable alternative to the existing unsustainable disposal methods such as landfilling and fly tipping and it commonly conforms to the principle of circular economy [4]
Ajay et al [14] concluded that legislation on waste management can effectively promote the recycling of CDW and proposed policy measures whereby substantial CDW can be diverted from the landfill
Summary
With an accelerated and large-scale urbanisation process, the whole of society has benefited from the construction industry while a great deal of construction and demolition waste (CDW) has been generated. In long-term relationships, observations of interim public signals allow governments and recyclers to dynamically learn about the unknown information, and this process of learning potentially affects the contracts and their decisions. The dual 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 and achieve sustainable development. To the best of our knowledge, this study represents the first attempt to design the optimal static and dynamic incentive contracts for promoting CDW recycling under dual information asymmetry. By designing the effective incentive mechanism under dual information asymmetry, the CDW recycling will be encouraged and the sustainable development will be achieved. All mathematical proofs are provided in the Appendice A, Appendice B, Appendice C, Appendice D, Appendice E, Appendice F, Appendice G, Appendice H, Appendice I, Appendice J and Appendice K
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