Optimal Pricing of Depletable, Replaceable Resources: The Case of Landfill Tipping Fees |
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Authors: | Ready Mark J Ready Richard C |
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Abstract: | We develop a general model for pricing a depletable, replaceable asset, and discuss its application in determining optimal tipping fees for a sanitary landfill. We show that the optimal fee includes a component that grows at the real interest rate as space in the landfill is depleted, and then drops when a new landfill is built. Because the scarcity cost of landfill space increases as the landfill is filled, it may be optimal to delay a waste reduction program (such as recycling, composting, or incineration) until the landfill is partially full. |
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