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

Kinokunia Hiroshi

Ohorib Shuichi

Tomoda Yasunobu

Discussion Paper Series, School of Economics, Hiroshima University

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.

disposal fee

advance disposal fee

durable goods

planned obsolescence

illegal dumping

eng

School of Economics, Hiroshima University

広島大学経済学会

[URI] https://www.hiroshima-u.ac.jp/econ/society/discussion%20paper%20Series