Effects of E-Waste Regulation on New Product Introduction

This paper investigates the impact of e-waste regulation on new product introduction in a stylized model of the electronics industry. Manufacturers choose the development time and expenditure for each new version of a durable product, which together determine its quality. Consumers purchase the new product and dispose of the last-generation product, which becomes e-waste. The price of a new product strictly increases with its quality and consumers' rational expectation about the time until the next new product will be introduced. "Feeupon-sale" types of e-waste regulation cause manufacturers to increase their equilibrium development time and expenditure, and thus the incremental quality for each new product. As new products are introduced ( and disposed of) less frequently, the quantity of e-waste decreases and, even excluding the environmental benefits, social welfare may increase. Consumers pay a higher price for each new product because they anticipate using it for longer, which increases manufacturers' profits. Unfortunately, existing "fee-upon-sale" types of e-waste regulation fail to motivate manufacturers to design for recyclability. In contrast, "fee-upon-disposal" types of e-waste regulation such as individual extended producer responsibility motivate design for recyclability but, in competitive product categories, fail to reduce the frequency of new product introduction.