ECONOMIC AND ENVIRONMENTAL EFFECTS OF REFILL PACKS

Abstract

It is common sense that refill packs can increase the repeated use of durable goods, reduce resource waste and be conducive to environmental protection. However, their existence also has an economic effect. For instance, we find that the profit of a monopolistic firm will increase as a result of selling the refill packs when the depreciation rate of the durable good is low. In an extension of the model, we point out that there is an entrant that competes with the incumbent in relation to the composite goods and the refill packs. In order to compete in terms of the prices of the composite goods, the incumbent sells the refill packs not only to increase profit, but also to reduce the amount of waste resulting from the durable goods. As for competing in regard to the prices of the refill packs, if the cost of the composite goods is small, then the incumbent's profit from selling the composite goods will increase. By comparing two extensions of the model, we find that the environmental effect of the price competition in regard to the refill packs is greater than the environmental effect of the price competition in relation to the composite goods.