Recycling of a Primary Resource and Market Power: The Alcoa Case

Bocar Samba Ba ()
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Bocar Samba Ba: CERDI

No 2017.27, Working Papers from FAERE - French Association of Environmental and Resource Economists

Abstract: The purpose of this paper is threefold. First, it investigates the influence of the prospect of recycling on the per-period market power of an extractor, which can be associated with Alcoa when the recycling sector it faces is competitive. Second, it analyzes whether or not the extractor’s first period market power is affected when it is capacity constrained. Third, it explores whether the structure of the recycling sector affects the extractor’s per-period market power or not. Toward these ends, we study a two-period Cournot framework where the extractor produces aluminum over two consecutive periods. In the second period, it engages in competition with a recycling sector that can be competitive or not. Our results run as follows. (1) When the recycling sector is not competitive, recycling does not affect the extractor’s first period market power but increases its second period market power. (2) When the recycling sector is competitive, the extractor’s second period market power increases with the recycled output but becomes lower (compared to the non-competitive case), while its first period market power can be lower or higher (compared to the non-competitive case). Then, it can increase or decrease with the recycled output. (3) In either case, the extractor’s first period market power further increases when the primary resource constraint is binding. (4) We also show that the extractor’s market power can increase or decrease over time.

Keywords: Market Power; Recycling; Cournot Competition; Capacity Constraint (search for similar items in EconPapers)
JEL-codes: D43 L13 L61 L72 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2017-11
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http://faere.fr/pub/WorkingPapers/Ba_FAERE_WP2017.27.pdf First version, 2017 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:fae:wpaper:2017.27

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