Effects of E-Waste Regulation on New Product Introduction

Erica Plambeck () and Qiong Wang ()
Additional contact information
Erica Plambeck: Graduate School of Business, Stanford University, Stanford, California 94305
Qiong Wang: Alcatel-Lucent Bell Laboratories, Murray Hill, New Jersey 07974

Management Science, 2009, vol. 55, issue 3, 333-347

Abstract: This paper investigates the impact of e-waste regulation on new product introduction in a stylized model of the electronics industry. Manufacturers choose the development time and expenditure for each new version of a durable product, which together determine its quality. Consumers purchase the new product and dispose of the last-generation product, which becomes e-waste. The price of a new product strictly increases with its quality and consumers' rational expectation about the time until the next new product will be introduced. "Fee-upon-sale" types of e-waste regulation cause manufacturers to increase their equilibrium development time and expenditure, and thus the incremental quality for each new product. As new products are introduced (and disposed of) less frequently, the quantity of e-waste decreases and, even excluding the environmental benefits, social welfare may increase. Consumers pay a higher price for each new product because they anticipate using it for longer, which increases manufacturers' profits. Unfortunately, existing "fee-upon-sale" types of e-waste regulation fail to motivate manufacturers to design for recyclability. In contrast, "fee-upon-disposal" types of e-waste regulation such as individual extended producer responsibility motivate design for recyclability but, in competitive product categories, fail to reduce the frequency of new product introduction.

Keywords: environmental regulation; computer electronics industry; dynamic game; new product introduction (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (65)

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