To solve information asymmetry, we adopted the principal-agent framework to design the incentive mechanisms between the remanufacturer and the collector in the construction and demolition (C&D) waste-recycling industry. By using the model of reciprocity, we analyzed how the entities’ behavioral motives affect their decisions in terms of the incentive mechanisms. The findings showed that the collector responds to their perception of the remanufacturer’s intentions. If the perception is positive, they will make more effort in the collection work. If not, less effort will be put forth. Most importantly, we found that reciprocity helps to save the remanufacturer cost in the incentive mechanisms and makes the collector choose a higher effort level in the collection work. This finding showed that reciprocity serves to solve information asymmetry. By conducting a numerical simulation, we found that although a high subsidy policy can achieve rapid improvement of recycling-supply-chain performance, it is inefficient in maintaining friendly cooperation between the remanufacturer and the collector.

The generation of construction and demolition waste (CDW) is a problem for societies aspiring to sustainability. In this regard, governments have the responsibility to support the CDW recycling through subsidies. However, the information asymmetry, as well as the “dynamic nature” of the CDW recycling market, results in a number of barriers for the government to promote CDW recycling. In this paper, we establish a mathematical model that includes the government and the recycling enterprise in the presence of dual information asymmetry including the unknown recycling technology level and unobservable recycling efforts in one-stage and two-stage cooperation. Using the incentive theory, the static and dynamic optimal recycling incentive contracts of the government were designed, and the optimal decisions of the recycler were identified. A numerical simulation revealed that by designing reasonable contracts, the government can encourage the recycler to report the true technical level and achieve information screening. Furthermore, the subsidy of the high-tech recycler remained unchanged under different circumstances. However, the subsidy of the low-tech recycler was closely related to the probability of misreporting and the proportion of technology types. This finding suggests that the government and recycler are inclined towards long-term dynamic cooperation.

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