Municipal strategies, fiscal incentives and co-production in urban waste management
Fabio Fiorillo, Elvina Merkaj
Abstract
A theoretical model is proposed to guide municipalities in minimizing recycling costs while meeting central government targets. The model considers the co-production from both citizens and firms and includes the municipality as the primary waste service provider and a private firm as a competitor. Households can only dispose of recycled waste through the municipal system, whereas firms have the flexibility to either use municipal waste management for disposal or sell their recycled waste to a private firm.The model resolves a sequential game between the municipality and firms, where the municipality sets the rules by defining the recycling capital and tax incentives, while firms and citizens decide their optimal waste disposal practices. The aim is to explain the decision-making process of municipalities, the impact of tax incentives on firms’ waste management choices, and the implications of citizens and firms involvement in such co-production activities. Findings contribute to the development of sustainable waste management practices towards the achievement of sustainability goals.