Optimal Waste Disposal Charges in Vertically Linked Waste-Treatment Markets under Bilateral Market Power

doi:10.15266/KEREA.2026.35.2.243

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2026 Vol.35, Issue 2 Preview Page Next Page

Research Paper

Optimal Waste Disposal Charges in Vertically Linked Waste-Treatment Markets under Bilateral Market Power 양면적 시장지배력하에서의 최적 폐기물 처분부담금 결정요인 분석: 수직적으로 연계된 폐기물 처리시장 모형: 한택환*
Taek-Whan Han*; *서경대학교 명예교수, 단독저자(e-mail: twhan@skuniv.ac.kr)

*Professor Emeritus, SeoKyeong University, Sole author (e-mail: twhan@skuniv.ac.kr)

30 June 2026. pp. 243-284

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Abstract

This paper analyzes the determinants of the welfare-maximizing waste disposal charge in a vertically organized waste-treatment system characterized by bilateral market power. Waste generated in production is processed sequentially through intermediate treatment and final disposal, and the intermediate treatment firm simultaneously acts as a supplier in the upstream treatment market and a demander in the downstream disposal market. This dual role links the two treatment stages through technological and accounting relationships and provides a structural channel through which incentives are transmitted across the waste-treatment system. We develop an equilibrium model in which decentralized market outcomes are determined by a Nash equilibrium among the waste generator, the intermediate treatment firm, and the final disposer, while the government determines the disposal charge within a bilevel policy framework that anticipates these equilibrium responses. Strategic effects in the equilibrium conditions arise through the interaction between market-structure parameters and the slopes of the relevant demand and supply schedules. Monte Carlo simulations show that the welfare-maximizing disposal charge can deviate substantially from the Pigouvian benchmark in the presence of bilateral market power. To clarify the interpretation of the policy instrument, the optimal disposal charge is decomposed into a net environmental component and a distortion-correcting component. The distortion-correcting component is obtained from the solution to the same policy problem after setting the environmental damage parameter equal to zero. The results show that market structure and elasticity conditions significantly influence the total disposal charge, whereas the environmental component of the policy instrument is determined primarily by marginal environmental damage. These findings suggest that, within the analytical environment examined in this study, the commonly cited proposition that market power lowers or modifies the optimal environmental tax requires qualification: market power mainly affects the distortion-correcting component of the policy instrument rather than the environmental benchmark itself. More broadly, the analysis demonstrates that the optimal disposal charge in vertically connected waste-treatment markets is jointly determined by environmental damage, elasticity conditions, and market structure. The results provide a framework for distinguishing environmental policy objectives from competition- policy considerations in the design of waste-disposal charges.

Keywords

Waste disposal charge

Bilateral market power

Nash equilibrium

Market structure

Environmental damage

Elasticity conditions

Monte Carlo simulation

본 연구는 양면적 시장지배력이 존재하는 수직적으로 연계된 폐기물 처리체계에서 사회후생을 극대화하는 처분부담금율의 결정요인을 분석한다. 폐기물은 생산 과정에서 발생한 후 중간처리와 최종처분의 두 단계를 거쳐 처리되며, 중간처리업자는 상류의 중간처리시장에서는 서비스 공급자로, 하류의 최종처분시장에서는 서비스 수요자로 동시에 참여한다. 이러한 이중적 역할은 두 처리단계를 기술적·회계적 관계로 연결하며 폐기물 처리체계 전반에 걸쳐 경제적 유인의 전달경로를 형성한다. 본 연구는 폐기물 배출자, 중간처리업자 및 최종처분업자 간의 전략적 상호작용이 내쉬(Nash) 균형으로 결정되는 구조적 균형모형을 구축하고, 정부는 이러한 균형반응을 고려하는 이중수준(bilevel) 정책구조 하에서 사회후생을 극대화하는 처분부담금율을 결정한다. 균형조건에서 나타나는 전략적 효과는 시장구조 파라미터와 관련 수요·공급곡선 기울기 파라미터의 상호작용을 통해 나타나며, 이를 통해 최적 처분부담금율의 결정요인을 환경피해, 탄력성 조건 및 시장구조라는 세 가지 구조적 요소로 정식화한다. 몬테카를로 시뮬레이션 결과, 양면적 시장지배력이 존재하는 경우 사회후생 극대화 처분부담금율은 Pigou적인 기준에서 상당히 벗어날 수 있는 것으로 나타났다. 또한 정책수단의 경제적 의미를 보다 명확히 해석하기 위하여 최적 처분부담금율을 환경적 구성요소와 시장왜곡 보정요소로 분해하였다. 시장왜곡 보정요소는 환경피해 파라미터를 0으로 설정한 동일한 정책문제의 해로부터 도출되며, 환경적 구성요소는 총 처분부담금율에서 이를 차감하여 산출된다. 분석 결과, 시장구조와 탄력성 조건은 총 처분부담금율에 상당한 영향을 미치는 반면, 정책수단의 환경적 구성요소는 주로 한계환경피해의 크기에 의해 결정되는 것으로 나타났다. 이는 본 연구의 분석환경 하에서 일반적으로 받아들여지는 “시장지배력이 최적 환경세를 낮추거나 수정한다”는 명제의 적용범위가 보다 신중하게 검토될 필요가 있음을 시사한다. 즉, 시장지배력은 주로 정책수단의 시장왜곡 보정요소에 영향을 미치며, 환경적 기준 자체에는 상대적으로 제한적인 영향을 미친다. 보다 일반적으로 본 연구는 수직적으로 연계된 폐기물 처리체계에서 최적 처분부담금율이 환경피해, 탄력성 조건 및 시장구조에 의해 공동으로 결정됨을 보여준다. 또한 본 연구의 분석틀은 폐기물 처리시장에서 환경정책적 목표와 경쟁정책적 고려사항을 구분하여 이해할 수 있는 구조적 기반을 제공한다.

키워드

폐기물처분부담금

양면적 시장지배력

내쉬균형

시장구조

환경피해

탄력성 조건

몬테카를로 시뮬레이션

References

Appelbaum, E., “The Estimation of the Degree of Oligopoly Power,” Journal of Econometrics, Vol. 19, 1982, pp. 287~299. 10.1016/0304-4076(82)90006-9
Barnett, A. H., “The Pigovian Tax Rule under Monopoly,” American Economic Review, Vol. 70, No. 5, 1980, pp. 1037~1041.
Baumol, W. J., 1995, “Environmental Industries with Substantial Start-up Costs as Contributors to Trade Competitiveness,” Annual Review of Energy and Environment, Vol. 20, No. 1, pp. 71~81. 10.1146/annurev.energy.20.1.71
Bovenberg, A. L., and L. H. Goulder, “Optimal Environmental Taxation in the Presence of Other Taxes: General Equilibrium Analyses,” American Economic Review, Vol. 86, No. 4, 1996, pp. 985~1000.
Bovenberg, A. L., and R. A. de Mooij, “Environmental Levies and Distortionary Taxation,” American Economic Review, Vol. 84, No. 4, 1994, pp. 1085~1089.
Buchanan, J. M., “External Diseconomies, Corrective Taxes, and Market Structure,” American Economic Review, Vol. 59, No. 1, 1969, pp. 174~177.
Chapra, S. C., and R. P. Canale, Numerical Methods for Engineers, 7th ed., McGraw-Hill, 2015.
Chung, C., Industrial Organization Models and Their Applications in Food and Agricultural Industries, Lecture Notes, Korea University, 2017.
David, M., A. D. Nimubona, and B. Sinclair-Desgagné, “Emission Taxes and the Market for Abatement Goods and Services,” Resource and Energy Economics, Vol. 33, 2011, pp. 179~191. 10.1016/j.reseneeco.2010.04.010
David, M., and B. Sinclair-Desgagné, 2005, “Environmental Regulation and the Eco-industry,” Journal of Regulatory Economics, Vol. 28, No. 2, pp. 141~155. 10.1007/s11149-005-3106-8
Di Foggia, G., and M. Beccarello, “Market Structure of Urban Waste Treatment and Disposal: Empirical Evidence from the Italian Industry,” Sustainability, Vol. 13, 2021. 10.31235/osf.io/fwk6d
Feess, E., and G. Muehlheusser, “Strategic Environmental Policy, Clean Technologies and the Learning Curve,” Environmental and Resource Economics, Vol. 23, 2002, pp. 149~166. 10.1023/A:1021249404533
Feess, E., and G. Muehlheusser, “Strategic Environmental Policy, International Trade, and the Learning Curve,” Review of Economics, Vol. 50, No. 2, 1999, pp. 178~194.
Han, T. W., “Determinants of the Optimal Waste Disposal Charge Rate: A Numerical Simulation with Comparative Statics,” Journal of Environmental Policy and Administration, Vol. 33, No. 1, 2025, pp. 23-57. 10.15301/jepa.2025.33.1.23
Ji, I., and C. Chung, “Assessment of market power and cost efficiency effects in the U.S. beef packing industry,” Journal of Rural Development, 39(Special Issue), 2016, pp.35~58.
Judd, K. L., Numerical Methods in Economics, MIT Press, Cambridge, MA, 1998.
Kaneko, R., “A Study on the Institutional Design and Burden of Industrial Tax: Regarding the Incidence of ‘Tax Equivalent’,” Keiai University Research Journal, 2015. (in Japanese)
Kaneko, R., Institutional Design of Industrial Waste Tax, Hakuto Shobo, Tokyo, 2009. (in Japanese)
Kim, G. S., and Y. Chang, “Analysis on the Effect of Waste Disposal Charge on the Quantity of Disposal and Revenue,” in Study on the Design and Operation of Charge System for the Transition to Circular Society: Part I, Ministry of Environment, 2017. (in Korean)
Kurasaka, H., “Trends and Issues of Industrial Waste Tax,” Journal of the Japan Society of Waste Management Experts, Vol. 14, No. 4, 2003, pp. 171~181. (in Japanese) 10.3985/wmr.14.171
Lho, S., “The Optimal Environmental Tax Rates in the Generalized Utilitarian Social Welfare Function,” Environmental and Resource Economics Review, Vol. 11, No. 4, 2002, pp. 689~706. (in Korean)
Lukac, Z., K. Puljic, and V. Kojic, “Maximizing Tax Revenue for Profit-Maximizing Monopolist with the CES Production Function and Linear Demand as a Stackelberg Game Problem,” Mathematics, Vol. 13, 2025. 10.3390/math13050825
Misiolek, W. S., “Effluent Taxation in Monopoly Markets,” Journal of Environmental Economics and Management, Vol. 7, 1980, pp. 103~107. 10.1016/0095-0696(80)90012-1
Morris, J. R., and A. D. Read, “The UK Landfill Tax and the Landfill Tax Credit Scheme: Operational Weaknesses,” Resources, Conservation and Recycling, Vol. 32, 2001, pp. 375~387. 10.1016/S0921-3449(01)00072-6
Oprea, S. V., and A. Bara, “Two-Step Price Mechanism Using Newton~Raphson Method and Peer-to-Peer Mediation for Local Electricity Markets,” Energy Strategy Reviews, Vol. 59, 2025. 10.1016/j.esr.2025.101701
Parry, I. W. H., “Pollution Taxes and Revenue Recycling,” Journal of Environmental Economics and Management, Vol. 29, 1995. 10.1006/jeem.1995.1061
Pigou, A. C., The Economics of Welfare, London: Macmillan and Co, 1920.
Requate, T., “Dynamic Incentives by Environmental Policy Instruments: A Survey,” Ecological Economics, Vol. 54, 2005a, pp. 175~195. 10.1016/j.ecolecon.2004.12.028
Requate, T., Environmental Policy under Imperfect Competition: A Survey, Working Paper No. 2005-12, Kiel University, 2005b.
Su, C. L., and K. L. Judd, “Constrained Optimization Approaches to Estimation of Structural Models,” Econometrica, Vol. 80, No. 5, 2012, pp. 2213~2230. 10.3982/ECTA7925

Information

Publisher :Environmental and Resource Economics Review
Publisher(Ko) :자원 · 환경경제연구
Journal Title :자원·환경경제연구
Journal Title(Ko) :Environmental and Resource Economics Review
Volume : 35
No :2
Pages :243-284
DOI :https://doi.org/10.15266/KEREA.2026.35.2.243

[1] Appelbaum, E., “The Estimation of the Degree of Oligopoly Power,” Journal of Econometrics, Vol. 19, 1982, pp. 287~299. 10.1016/0304-4076(82)90006-9

[2] Barnett, A. H., “The Pigovian Tax Rule under Monopoly,” American Economic Review, Vol. 70, No. 5, 1980, pp. 1037~1041.

[3] Baumol, W. J., 1995, “Environmental Industries with Substantial Start-up Costs as Contributors to Trade Competitiveness,” Annual Review of Energy and Environment, Vol. 20, No. 1, pp. 71~81. 10.1146/annurev.energy.20.1.71

[4] Bovenberg, A. L., and L. H. Goulder, “Optimal Environmental Taxation in the Presence of Other Taxes: General Equilibrium Analyses,” American Economic Review, Vol. 86, No. 4, 1996, pp. 985~1000.

[5] Bovenberg, A. L., and R. A. de Mooij, “Environmental Levies and Distortionary Taxation,” American Economic Review, Vol. 84, No. 4, 1994, pp. 1085~1089.

[6] Buchanan, J. M., “External Diseconomies, Corrective Taxes, and Market Structure,” American Economic Review, Vol. 59, No. 1, 1969, pp. 174~177.

[7] Chapra, S. C., and R. P. Canale, Numerical Methods for Engineers, 7th ed., McGraw-Hill, 2015.

[8] Chung, C., Industrial Organization Models and Their Applications in Food and Agricultural Industries, Lecture Notes, Korea University, 2017.

[9] David, M., A. D. Nimubona, and B. Sinclair-Desgagné, “Emission Taxes and the Market for Abatement Goods and Services,” Resource and Energy Economics, Vol. 33, 2011, pp. 179~191. 10.1016/j.reseneeco.2010.04.010

[10] David, M., and B. Sinclair-Desgagné, 2005, “Environmental Regulation and the Eco-industry,” Journal of Regulatory Economics, Vol. 28, No. 2, pp. 141~155. 10.1007/s11149-005-3106-8

[11] Di Foggia, G., and M. Beccarello, “Market Structure of Urban Waste Treatment and Disposal: Empirical Evidence from the Italian Industry,” Sustainability, Vol. 13, 2021. 10.31235/osf.io/fwk6d

[12] Feess, E., and G. Muehlheusser, “Strategic Environmental Policy, Clean Technologies and the Learning Curve,” Environmental and Resource Economics, Vol. 23, 2002, pp. 149~166. 10.1023/A:1021249404533

[13] Feess, E., and G. Muehlheusser, “Strategic Environmental Policy, International Trade, and the Learning Curve,” Review of Economics, Vol. 50, No. 2, 1999, pp. 178~194.

[14] Han, T. W., “Determinants of the Optimal Waste Disposal Charge Rate: A Numerical Simulation with Comparative Statics,” Journal of Environmental Policy and Administration, Vol. 33, No. 1, 2025, pp. 23-57. 10.15301/jepa.2025.33.1.23

[15] Ji, I., and C. Chung, “Assessment of market power and cost efficiency effects in the U.S. beef packing industry,” Journal of Rural Development, 39(Special Issue), 2016, pp.35~58.

[16] Judd, K. L., Numerical Methods in Economics, MIT Press, Cambridge, MA, 1998.

[17] Kaneko, R., “A Study on the Institutional Design and Burden of Industrial Tax: Regarding the Incidence of ‘Tax Equivalent’,” Keiai University Research Journal, 2015. (in Japanese)

[18] Kaneko, R., Institutional Design of Industrial Waste Tax, Hakuto Shobo, Tokyo, 2009. (in Japanese)

[19] Kim, G. S., and Y. Chang, “Analysis on the Effect of Waste Disposal Charge on the Quantity of Disposal and Revenue,” in Study on the Design and Operation of Charge System for the Transition to Circular Society: Part I, Ministry of Environment, 2017. (in Korean)

[20] Kurasaka, H., “Trends and Issues of Industrial Waste Tax,” Journal of the Japan Society of Waste Management Experts, Vol. 14, No. 4, 2003, pp. 171~181. (in Japanese) 10.3985/wmr.14.171

[21] Lho, S., “The Optimal Environmental Tax Rates in the Generalized Utilitarian Social Welfare Function,” Environmental and Resource Economics Review, Vol. 11, No. 4, 2002, pp. 689~706. (in Korean)

[22] Lukac, Z., K. Puljic, and V. Kojic, “Maximizing Tax Revenue for Profit-Maximizing Monopolist with the CES Production Function and Linear Demand as a Stackelberg Game Problem,” Mathematics, Vol. 13, 2025. 10.3390/math13050825

[23] Misiolek, W. S., “Effluent Taxation in Monopoly Markets,” Journal of Environmental Economics and Management, Vol. 7, 1980, pp. 103~107. 10.1016/0095-0696(80)90012-1

[24] Morris, J. R., and A. D. Read, “The UK Landfill Tax and the Landfill Tax Credit Scheme: Operational Weaknesses,” Resources, Conservation and Recycling, Vol. 32, 2001, pp. 375~387. 10.1016/S0921-3449(01)00072-6

[25] Oprea, S. V., and A. Bara, “Two-Step Price Mechanism Using Newton~Raphson Method and Peer-to-Peer Mediation for Local Electricity Markets,” Energy Strategy Reviews, Vol. 59, 2025. 10.1016/j.esr.2025.101701

[26] Parry, I. W. H., “Pollution Taxes and Revenue Recycling,” Journal of Environmental Economics and Management, Vol. 29, 1995. 10.1006/jeem.1995.1061

[27] Pigou, A. C., The Economics of Welfare, London: Macmillan and Co, 1920.

[28] Requate, T., “Dynamic Incentives by Environmental Policy Instruments: A Survey,” Ecological Economics, Vol. 54, 2005a, pp. 175~195. 10.1016/j.ecolecon.2004.12.028

[29] Requate, T., Environmental Policy under Imperfect Competition: A Survey, Working Paper No. 2005-12, Kiel University, 2005b.

[30] Su, C. L., and K. L. Judd, “Constrained Optimization Approaches to Estimation of Structural Models,” Econometrica, Vol. 80, No. 5, 2012, pp. 2213~2230. 10.3982/ECTA7925

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