Abstract:
Efficient waste management (WM) depends upon the accurate characterization of each waste unit and identification of its optimal WM supply chain destination. This paper develops a microeconomic model of WM that includes the possibility of investing in artificial intelligence (AI) research and development. While investing in AI is costly, improving waste characterization ability via AI simultaneously reduces the firm’s WM costs and creates additional revenue streams from better-characterized waste sold in secondary markets and from monetizing its AI innovations via intellectual property licensing. The model characterizes specific AI advances in WM of interest to economists, policy makers and waste managers. The economics of AI in pollution control contexts beyond WM are discussed.