Efficiency Effects of Unit-Based Pricing Systems and Institutional Choices of Waste Collection

Tinbergen Institute Discussion Paper 14-003/VI

26 Pages Posted: 4 Jan 2014

See all articles by Elbert Dijkgraaf

Elbert Dijkgraaf

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Erasmus University Rotterdam, SEOR-ECRi

Raymond Gradus

School of Business and Economics

Date Written: January 3, 2014

Abstract

Much attention has been paid to the influence of the institutional form of waste collection on costs. We extend this literature in three directions by including the unit-based pricing system. First, we show that unit-based pricing systems are more important from a cost-minimizing point of view than the institutional mode of waste collection. In particular, the bag-based and frequency-based pricing systems are preferred. Second, dividing the cost effects between price and quantity effects, we illustrate that lower administrative costs and a smaller waste quantity are the most important drivers of cost decreases. It also shows that a disadvantage of the bag-based system is that it is not easy to price compostable waste. Third, if more general cost functions are analyzed, these estimations suggest that there are economies of scale for small municipalities.

Keywords: waste collection; cost functions; efficiency; unit-based pricing; contracting out

JEL Classification: H31, H71, Q38

Suggested Citation

Dijkgraaf, Elbert and Gradus, Raymond, Efficiency Effects of Unit-Based Pricing Systems and Institutional Choices of Waste Collection (January 3, 2014). Tinbergen Institute Discussion Paper 14-003/VI, Available at SSRN: https://ssrn.com/abstract=2374345 or http://dx.doi.org/10.2139/ssrn.2374345

Elbert Dijkgraaf (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Erasmus University Rotterdam, SEOR-ECRi ( email )

P.O. Box 1738
H 7-34
Rotterdam, 3000 DR
Netherlands
+31 10 4082590 (Phone)
+31 10 4089650 (Fax)

HOME PAGE: http://www.ecri.nl

Raymond Gradus

School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

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