Modeling market distortions in an applied general equilibrium framework: the case of flat fee pricing in the waste market

摘要

This paper deals with modeling of market distortions in general equilibrium models. It focuses specifically on the problems associated with flat fee pricing in the waste market. A general equilibrium model for the waste market is presented and it is described in detail how market distortions as a result of flat fee pricing can be introduced in the Negishi format. A numerical example has been used to demonstrate the effects of flat fee pricing on the generation of waste. The results show that reducing the price for recycling has no effect on the actual demand for waste recycling services and even stimulates waste generation by households. Policies to promote recycling, therefore, can not be effective unless they are combined with the introduction of variable prices for waste collection.