First, the ability to dispose waste in a collective system introduces network effects
in waste disposal cost functions that lead to increasing prices for waste disposal over distance from the disposal facility. In
the case of solid waste disposal, network effects can be driven by rising transportation costs over distance, while in the case
of liquid and gaseous waste, network effects can arise when the cost of moving a given volume of pollution through a
pipeline or drainage canal depends on the cumulative stock of waste.
Second, as disposal costs rise over distance from the disposal facility, the optimal mix of waste disposal activities must
also change over distance to equate the marginal value of each activity with the unit cost of waste disposal. Relative to
producers in close proximity to the disposal facility, producers more distant from the disposal facility, who face relatively
higher disposal costs, must engage in greater abatement effort and incur greater local pollution damages to equalize margins
in the socially optimal resource allocation.