Umeå Economic Studies,
Umeå University, Department of Economics

Abstract: General features of waste treatment markets include comprehensive regulations and high fixed capital costs. Hence, firms operating in them have substantial local market power, which is used to mark up prices through spatial price discrimination (Granlund and Meens-Eriksson, 2023). This paper examines effects of waste treatment firms’ spatial price discrimination on Swedish municipalities’ welfare and costs of waste disposal, as well as the associated distributional implications. Results show that the Equivalent Variation is 3.3% of a municipality’s cost for residual waste disposal, on average. Further, the welfare loss disproportionately affects a small number of municipalities, with 10% accounting for 62% of consumer welfare loss. Nearly the entire loss in consumer welfare is redistributed to firms. Considering political ambitions to transform the waste management sector, an alternative scenario is simulated, involving closure of the smallest 20% of waste incineration plants. This would increase the disposal cost for about a quarter of municipalities, and the negative welfare effect within this group would be 12% of their cost of waste disposal.

Keywords: Spatial price discrimination; welfare effects; equivalent variation; waste economics

JEL-codes: D43; D60; L11; L13; Q53

Language: English

29 pages, February 3, 2024

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