Manufacturers’ Competition and Cooperation in Sustainability: Stable Recycling Alliances

Fang Tian (), Greys Sošić () and Laurens Debo ()
Additional contact information
Fang Tian: Business Administration Division, Pepperdine University, Malibu, California 90263
Greys Sošić: Marshall School of Business, University of Southern California, Los Angeles, California 90089
Laurens Debo: Tuck School of Business, Dartmouth College, Hanover, New Hampshire 03755

Management Science, 2019, vol. 65, issue 10, 4733-4753

Abstract: Rather than organizing disposal of consumer-generated waste themselves, many states and countries have passed legislation that makes producers responsible for the proper disposal (i.e., recycling) of the products that they bring to the market. We study the stability of producers’ strategies emerging under such legislation. In our paper, the producers compete with multiple differentiated products in consumer markets but may consider cooperating when recycling those products to benefit from economies of scale. Products made by different producers or sold in different markets might still be considered for joint recycling. Our main questions are when and whether firm-based recycling strategies (i.e., separately recycling products falling under same brand) or market-based recycling strategies (i.e., separately recycling products falling in the same product category) emerge as stable outcomes. To that end, we analyze a series of simple producer-market configurations. We first look at an asymmetric market model with two producers making three products in two markets, and then, we look at a symmetric market model with two producers competing with four products in two markets. Our results show that, with intense market competition and differentiated market sizes, producers may recycle their products on their own without cooperating with others. In some instances, they can add a product from their competitor to their recycling mix. Because these outcomes are never socially optimal, they may reduce social welfare and require government intervention. Otherwise, with less intense competition or more equitable market shares, all-inclusive (market-based) recycling is the most common stable outcome with high (low) scale economies, and the firms’ independent choices might lead to social optima.

Keywords: extended producer responsibility (EPR); firm-based recycling; economies of scale; dynamic stability (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

Downloads: (external link)
https://doi.org/10.1287/mnsc.2018.3178 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:65:y:2019:i:10:p:4733-4753

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().