The implementation of ecological compensation for cross-regional domestic waste treatment is beneficial for balancing the interests of waste generation districts and waste treatment districts. This paper introduces dynamic differential games to capture the temporal evolution and adjustment of strategies, examining dynamic game strategies under different compensation scenarios (non-horizontal ecological compensation, horizontal ecological compensation and fully shared ecological compensation). A new interest distribution model is proposed, with empirical analysis conducted using Shanghai as a case study to validate the reliability and feasibility of the model. The findings indicate: (1) Government intervention combined with horizontal ecological compensation significantly improves waste management efficiency and urban welfare. The compensation mechanism fosters regional cooperation, optimizes resource allocation, reduces decision-making conflicts and enhances overall processing effectiveness. (2) Without a compensation mechanism, high costs in export regions and low benefits in import regions result in low cooperation willingness. The ecological compensation mechanism enhances willingness to cooperate by fairly distributing costs and benefits, optimizing long-term cooperation and overall gains. (3) Complete shared ecological compensation is optimal, though partial shared mechanisms are also effective in practice. Proper interest and ecological compensation ratios can significantly improve waste management efficiency and urban environment, strengthening long-term cooperation. The study theoretically expands the dynamic optimization and cooperation mechanism analysis in waste management, provides solutions for environmental policy formulation in cross-regional waste handling and offers new perspectives and tools for addressing complex issues in cross-regional environmental governance, including targeted policy recommendations with practical significance for enhancing cross-regional waste management.
