Extended Producer Responsibility for E-Waste: Individual or Collective Producer Responsibility?

We investigate the implications of collective and individual producer responsibility (CPR and IPR, respectively) models of product take-back laws for e-waste on manufacturers’ design for product recovery (DfR) choices and profits, and on consumer surplus in the presence of product competition. We show that IPR offers superior DfR incentives as compared to CPR, and provides a level competitive ground. CPR may distort competition and allow free-riding on DfR efforts to reduce product recovery costs. Thus, manufacturer preferences for IPR or CPR may differ because of the free-riding implications under CPR, with even high-end manufacturers having incentives to free-ride under certain competitive conditions. The policy choice between IPR and CPR is not clear cut from an economic welfare perspective. This choice involves a comparison between the effects of superior recovery cost reduction through improved DfR under IPR and the operational cost-efficiency under CPR.