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Flexible waste management under uncertainty

Di Corato, Luca and Montinari, Natalia LU (2014) In European Journal of Operational Research 234(1). p.174-185
Abstract
In this paper, we use stochastic dynamic programming to model the choice of a municipality which has to design an optimal waste management program under uncertainty about the price of recyclables in the secondary market. The municipality can, by undertaking an irreversible investment, adopt a flexible program which integrates the existing landfill strategy with recycling, keeping the option to switch back to landfilling, if profitable. We determine the optimal share of waste to be recycled and the optimal timing for the investment in such a flexible program. We find that adopting a flexible program rather than a non-flexible one, the municipality: (i) invests in recycling capacity under circumstances where it would not do so otherwise;... (More)
In this paper, we use stochastic dynamic programming to model the choice of a municipality which has to design an optimal waste management program under uncertainty about the price of recyclables in the secondary market. The municipality can, by undertaking an irreversible investment, adopt a flexible program which integrates the existing landfill strategy with recycling, keeping the option to switch back to landfilling, if profitable. We determine the optimal share of waste to be recycled and the optimal timing for the investment in such a flexible program. We find that adopting a flexible program rather than a non-flexible one, the municipality: (i) invests in recycling capacity under circumstances where it would not do so otherwise; (ii) invests earlier; and (iii) benefits from a higher expected net present value. (C) 2013 Elsevier B.V. All rights reserved. (Less)
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Real options, Flexibility, Municipal waste, Recycling
in
European Journal of Operational Research
volume
234
issue
1
pages
174 - 185
publisher
Elsevier
external identifiers
  • wos:000330148600016
  • scopus:84890442584
ISSN
0377-2217
DOI
10.1016/j.ejor.2013.09.026
language
English
LU publication?
yes
id
2e1e08c2-8d65-41da-8292-53eb8f91793b (old id 4318486)
date added to LUP
2014-02-25 09:59:15
date last changed
2017-01-01 03:19:40
@article{2e1e08c2-8d65-41da-8292-53eb8f91793b,
  abstract     = {In this paper, we use stochastic dynamic programming to model the choice of a municipality which has to design an optimal waste management program under uncertainty about the price of recyclables in the secondary market. The municipality can, by undertaking an irreversible investment, adopt a flexible program which integrates the existing landfill strategy with recycling, keeping the option to switch back to landfilling, if profitable. We determine the optimal share of waste to be recycled and the optimal timing for the investment in such a flexible program. We find that adopting a flexible program rather than a non-flexible one, the municipality: (i) invests in recycling capacity under circumstances where it would not do so otherwise; (ii) invests earlier; and (iii) benefits from a higher expected net present value. (C) 2013 Elsevier B.V. All rights reserved.},
  author       = {Di Corato, Luca and Montinari, Natalia},
  issn         = {0377-2217},
  keyword      = {Real options,Flexibility,Municipal waste,Recycling},
  language     = {eng},
  number       = {1},
  pages        = {174--185},
  publisher    = {Elsevier},
  series       = {European Journal of Operational Research},
  title        = {Flexible waste management under uncertainty},
  url          = {http://dx.doi.org/10.1016/j.ejor.2013.09.026},
  volume       = {234},
  year         = {2014},
}