Advance Disposal Fee vs. Disposal Fee: A Monopolistic Producer’s Durability Choice Model

Discussion Paper Series, School of Economics, Hiroshima University Issue 2020-1 Page 1-23 published_at 2020-03
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Title ( eng )
Advance Disposal Fee vs. Disposal Fee: A Monopolistic Producer’s Durability Choice Model
Creator
Kinokunia Hiroshi
Ohorib Shuichi
Source Title
Discussion Paper Series, School of Economics, Hiroshima University
Issue 2020-1
Start Page 1
End Page 23
Abstract
This study examines how waste disposal fee collection timing affects the durable goods producer’s choice of built-in durability under a monopoly. We categorize the disposal fee policies into two types: advance disposal fee (ADF) policy and disposal fee (DF) policy. We compare an ADF policy with a DF policy using a durable-goods monopoly model. This study shows that a DF policy has two opposing effects on built-in durability. Firstly, the DF policy gives the producer an incentive to increase built-in durability in order to delay the households’ disposal and to discount the future payment for the disposal fee. Secondly, the DF policy creates an incentive for consumers to dump waste illegally to avoid the disposal fee, and gives the producer an incentive to reduce built-in durability in order to avoid market saturation and associated future price cuts. As a result, on the one hand, a DF policy can make the producer produce the more durable product compared with an ADF policy; on the other hand, however, a DF policy may increase the amount of waste generated, and lead to an additional environmental damage.
Keywords
disposal fee
advance disposal fee
durable goods
planned obsolescence
illegal dumping
Descriptions
This research has been supported by MEXT/JSPS KAKENHI Grant Numbers 18K01634,18K01596 and 19K01606.
Language
eng
Resource Type technical report
Publisher
School of Economics, Hiroshima University
広島大学経済学会
Date of Issued 2020-03
Publish Type Version of Record
Access Rights open access
Source Identifier
[URI] https://www.hiroshima-u.ac.jp/econ/society/discussion%20paper%20Series