Circular Business Models: Product Design and Consumer Participation

Stefan Buehler, Rachel R. Chen and Daniel Halbheer
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Rachel R. Chen: University of California, Davis - Graduate School of Management
Daniel Halbheer: HEC Paris

No 1465, HEC Research Papers Series from HEC Paris

Abstract: This paper develops an analytical framework to study product design and consumer participation in circular business models with recycling. When making their purchase decisions, consumers account for the environmental impact of end-of-life product disposal. We show that a circular business model does not necessarily achieve the promise of zero waste, and that stronger environmental preferences may increase the corporate waste footprint through demand expansion. Introducing competition among firms does not affect the choice of recyclability but undermines the viability of a circular business model. For a profit-maximizing firm, financial incentives such as product buyback or deposit-refund schemes will not generate profit from recycling, but have an indirect and positive impact on the overall profit because they alter the firm's choice of recyclability. If consumers have heterogeneous recyclability concerns, the firm strategically distorts the recyclability offered to regular consumers downward when selling two products. Nevertheless, introducing a product line for profit can be good for the planet.

Keywords: Recycling; pricing; circular transition; competition; eco-segmentation (search for similar items in EconPapers)
JEL-codes: M30 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2022-12-30
New Economics Papers: this item is included in nep-com and nep-env
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https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4314781 Full text (text/html)

Related works:
Working Paper: Circular Business Models: Product Design and Consumer Participation (2023)
Working Paper: Circular Business Models: Product Design and Consumer Participation (2023)
Working Paper: Circular Business Models: Product Design and Consumer Participation (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1465

DOI: 10.2139/ssrn.4314781

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