Journal
MANAGEMENT SCIENCE
Volume 55, Issue 3, Pages 333-347Publisher
INFORMS
DOI: 10.1287/mnsc.1080.0970
Keywords
environmental regulation; computer electronics industry; dynamic game; new product introduction
Funding
- NSF [PECASE-0239840]
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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. Feeupon-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.
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