The effect of experience and quantity-based pricing on the valuation of a curbside recycling program

• Published in: Ecological economics Vol. 64; no. 2; pp. 433 - 443
• Main Authors: Bohara, Alok K., Caplan, Arthur J., Grijalva, Therese
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 15.12.2007; Elsevier
• Series: Ecological Economics
• Subjects: Curbside recycling; Households; Pricing; Recycling; Reduced container size; Social costs; Unit-pricing; Valuation; Waste management; Willingness to pay; Curbside recycling; Unit-pricing; Willingness to pay; Reduced container size
• ISSN: 0921-8009; 1873-6106
• DOI: 10.1016/j.ecolecon.2007.02.033

Quantity-based pricing for garbage collection services and recycling programs are becoming increasingly popular methods of meeting municipal solid waste diversion objectives. This article investigates household willingness to pay (WTP) for a pilot curbside recycling program (CRP) in the presence of a quantity-based pricing scheme for garbage collection services, which allows a household to alter their garbage container size at a reduced price. Unlike previous studies that have modeled the simultaneity of these household decisions as a two-step process, we jointly estimate the household's intentions using a full-information maximum-likelihood (FIML) approach. Our results show a strong positive correlation between a household's WTP for a CRP and its stated intention to reduce its garbage container size when a CRP is offered. The positive correlation suggests that WTP will be higher for households which are more likely to reduce their garbage container size. Thus, in the presence of quantity-based pricing, a household's WTP for recycling more fully reflects the marginal social costs of garbage disposal.