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The Dynamic Effects of Recycling on Oligopoly Competition: Evidence from the US Paper Industry

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  • Eddie Watkins

Abstract

Consumer recycling generates new intermediate inputs. If some of the inputs are used to manufacture a substitute for the original product, the primary seller faces an incentive to reduce current output and raise rivals' future costs. I find that firms in the US paper industry facing exposure to future competition from the recycled sector, based on differences between product specific recycling technologies, reduced output more than firms not exposed to the recycled sector as consumer recycling increased. I then use the model to illustrate how the strategic response to recycling affects environmental policy.

Suggested Citation

  • Eddie Watkins, 2024. "The Dynamic Effects of Recycling on Oligopoly Competition: Evidence from the US Paper Industry," American Economic Journal: Microeconomics, American Economic Association, vol. 16(3), pages 76-106, August.
    • Handle: RePEc:aea:aejmic:v:16:y:2024:i:3:p:76-106
    DOI: 10.1257/mic.20200301
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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L73 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Forest Products
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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