[M-IS21] Understanding plastic pollution: The reality and countermeasures

[MIS21-11] Does competition improve recycling efficiency?

*Daisuke Ichinose¹, Kai Nomura², Yuichi Ishimura³ (1.Rikkyo University, 2.Yamanashi Eiwa College, 3.Kindai University)

Keywords:Recycling, competition, monopoly, plastic waste

This study explores the effects of competition on waste recycling costs by empirically analyzing how the number of recycling plants near waste storage facilities affects recycling costs. Unlike most previous studies, this study uses a model that allows for a nonlinear relationship between competition and recycling costs. This model captures the two opposite effects of an increase in the number of recycling plants, that is, when the resulting increase in competition improves production efficiency while undermining the benefits of economies of scale. Utilizing plastic waste bidding data from Japan, we find that the monopolistic location of recycling plants reduces recycling costs. Specifically, the unit cost of recycling is approximately 3.2% cheaper when there is only one recycling plant within a 100-km radius of the storage facility than when there are multiple recycling plants. This result indicates that the monopolistic location of the recycling plant can benefit from economies of scale because it is likely to collect a sufficient amount of plastic waste compared to when there are several competitors. However, when the degree of monopoly is significant, the negative effects of market power in a monopolistic situation outweigh the cost-saving benefits. These findings indicate that a specific number of recycling plants are deemed efficient for cost minimization. Given that a major barrier to promoting recycling is its high private cost, examining a cost-effective market structure for the recycling industry will contribute significantly to the development of an effective recycling system.