Incentive contract for high-quality recycling of construction waste: Considering fairness concerns and information asymmetry

Due to the low environmental benefits of downcycling, stimulating high-quality recycling of construction and demolition waste (C&DW) has become an emerging focus. However, information asymmetry and behavioral preference pose significant challenges for the recycling enterprise to guarantee the quality of waste supplied by the collecting enterprise. To solve the above issues, this study relaxes the assumption of complete rationality in previous research, and designs incentive contracts with and without the collecting enterprise's fairness concerns. On this basis, the influences of information asymmetry and behavioral preference are discussed. The results indicate that the designed incentive contracts induce the collecting enterprise to reveal accurate information and willingly put in the optimal effort to increase supply quality. As the degree of information asymmetry changes, the recycling enterprise should adjust contract settings to avoid the collecting enterprise's rent-seeking behaviors. Furthermore, integrating the collecting enterprise's fairness concerns into incentive design increases the expected utility for both parties, which is beneficial to win-win results. This study creatively combines the theory of fairness concern with incentive mechanisms, enriching studies of incentives under bounded rationality. It also emphasizes interactive relationships between collecting enterprises and recycling enterprises, which provides a strategic guide for the self-regulation of market entities and contributes to a sustainable recycling industry.