Municipal strategies, fiscal incentives and co-production in urban waste management

We present a theoretical model examining household, firm, and municipal strategies in urban waste management. The model incorporates co-production by households and firms and introduces a private collector as a municipal competitor in waste management. Households can only dispose of recycled waste through the municipal system, while firms can choose between municipal waste management and selling recycled waste to the private collector. The model resolves a sequential game between the municipality and firms, with the municipality setting rules on recycling capital and tax incentives, while firms and households decide on 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 co-production activities. Findings contribute to the development of sustainable waste management practices towards the achievement of sustainable goals.