Problem definition: We study how extended producer responsibility (EPR) legislation implementations for durable products should differ from those for nondurable products. Academic/practical relevance: Certain unique characteristics of markets for durable products, which make designing EPR implementations more challenging, have not been explored to date in academia and practice. We fill this void by investigating the effect of EPR on durable-goods markets. Methodology: We develop a game-theoretic model to analyze durable-goods producers’ secondary market strategy under EPR and analytically explore its environmental implications. Results: The implications of EPR are not straightforward for durable products. On one hand, despite being focused on recycling, EPR may lead to an unintended benefit in the form of higher reuse levels by reducing producers’ secondary market interference. On the other hand, EPR can also induce or increase secondary market interference by producers. This diminishes environmental goals, such as reducing new production and increasing reuse levels—two key environmental goals with higher priority than increasing recycling. Policy implications: We offer insights for how the environmental effectiveness of EPR for durable products can be improved by appropriately choosing its implementation parameters. We show that implementation approaches that may be considered successful for nondurable products (e.g., packaging or end-of-life batteries) may not be suitable for durable products, such as electronics. For example, more stringent collection targets and infrastructure requirements can backfire in EPR implementations for durable products.
Summary In this article, we analyze the Minnesota Electronics Recycling Act to explore the benefits and potential drawbacks of a market‐based extended producer responsibility (EPR) legislation implementation with operational flexibility for manufacturers. Based on publicly available reports and stakeholder interviews, we find that the Minnesota Act attains two key goals of market‐based EPR (i.e., higher cost efficiencies and substantial landfill diversion); however, this may come at the expense of selective collection and recycling, an increased burden on local governments, and a loss of balance in contractual power between stakeholders. We observe that these concerns arise because of specific flexibility provisions afforded to manufacturers that allow them to operationalize their EPR compliance with a cost‐efficiency focus. Thus, we conclude that EPR goals must be carefully translated into operating rules in order to achieve goals while avoiding unintended consequences.
Problem definition: We investigate the effectiveness of different extended producer responsibility (EPR) implementation models for pharmaceuticals. In particular, we study two viable and prevalent models: (1) source reduction (SR), where a form of fee on sale is imposed on producers, and (2) end-of-pipe control (EC), where producers are made responsible for the collection of unused pharmaceuticals. Academic/practical relevance: The existing literature on EPR implementation models has focused primarily on nonconsumable products (e.g., electronics), whereas there is limited research on the effectiveness of different EPR implementation models for pharmaceuticals used in practice. We aim to fill this gap in this study. Methodology: We develop a game-theoretic model to characterize the equilibrium strategies of different stakeholders under both the SR and EC models and compare the resulting producer profit, environmental/social impact, and total welfare. Results: In contrast to the nonconsumable contexts where the SR model is shown to maximize total welfare, the EC model leads to a higher total welfare for certain categories of pharmaceuticals because of its effectiveness in eliminating overprescription. Moreover, we characterize conditions under which stakeholder (e.g., producer, environmental/social advocacy groups) preferences toward EPR implementation model choices are (mis-)aligned. We further show that limiting the social planner’s budget surplus under SR can eliminate the preference misalignment but leads to a loss of total welfare. Managerial implications: (1) Policymakers should be cautious about directly applying preferred EPR models from other product categories to the pharmaceutical setting. (2) The EC model maximizes the objectives of all stakeholders for a salient category of pharmaceuticals with high health benefits, high collection costs, and high environmental/social costs. (3) Policymakers should give thought to differentiating EPR implementation models across pharmaceutical categories. (4) It is important to carefully quantify the health impact of the pharmaceuticals and the operational cost parameters to inform policymaking.
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