Recycling vs Mining: Competition for Market Shares, Collusion for Market Power

Jean de Beir, Thai Ha-Huy and Sylvain Sourisseau

Revue économique, 2023, vol. 74, issue 1, 81-113

Abstract: As an alternative to the production of virgin materials, recycling brings competition in a market dominated by an oligopoly of mining firms. Herein we investigate how recyclers affect the supply of materials in terms of market share and market power. An oligopoly of non-cooperative firms takes decisions about the level of extraction, knowing that this will affect the competition capacity of a fringe of competitive recyclers in the future. Hence, the mining firms are considered as leaders, and the market is completed by recyclers being considered as followers. The competition between mining firms as well as between the two sectors is described in a Cournot-Stackelberg model. We show the positive effect depending on the small number of mining firms and their aggregated market share and prove that a technology threshold is required to allow recyclers to enter the market and compete. Furthermore, we highlight that a significant switch in market shares and a decrease in the market power only arise when the levels of the recycling technology and the availability of scrap are both at a high level, while they vary a lot among countries and materials. JEL codes: L72, D43.

Keywords: competition; Cournot-Stackelberg model; Cournot-Stackelberg model; mining extraction; recycling (search for similar items in EconPapers)
JEL-codes: D43 L72 (search for similar items in EconPapers)
Date: 2023
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