Sustainability Science

, 5:143 | Cite as

An economic theory of reuse

  • Hide-Fumi YokooEmail author
Technical Report


An economic model of reuse is developed to analyse the effect of reuse activity on the amount of waste in the economy and the welfare of consumers. The paper adapts the theory of durable goods and second-hand markets. There is only one type of good, a durable good, which last two periods. A durable good is called ‘new’ in the first period and ‘used’ in the second period. Following Kim (Int Econ J 3:53–63, 1989), it is assumed that consumers differ in valuing the service rate of used goods. Their valuations are represented by a parameter θ, with a higher θ denoting consumers with a greater willingness to pay. In this study, high-θ consumers are referred to as reuse-friendly consumers. The new durable good is supplied in a competitive market. After the purchaser has used the good for one period, (s)he can sell it, keep it or throw it away. If a consumer decides to enter the second-hand market, (s)he has to pay a transaction cost. In equilibrium, the price of used goods will be determined endogenously by a second-hand market; it depends on the value of transaction costs. Thus, whether the second-hand market exists or not also depends on the value of transaction costs. It is shown that the amount of durable goods that is wasted is minimal when a second-hand market exists. When a second-hand market does not exist, increase in reuse-friendly consumers leads to decrease in the amount of waste. In the case of the second-hand market, when many consumers begin to reuse, the welfare of consumers who do not buy used goods will be improved.


Durable good Economic model Reuse Second-hand market Waste 



I am grateful to Takayoshi Shinkuma, Kazuhiro Ueta and the two anonymous referees and editors of this journal for their helpful comments. This work was supported by a Grant-in-Aid for JSPS Fellows 20-5428.


  1. Anderson SP, Ginsburgh VA (1994) Price discrimination via second-hand markets. Eur Econ Rev 38:23–44CrossRefGoogle Scholar
  2. Hendel I, Lizzeri A (1999) Interfering with secondary markets. RAND J Econ 30:1–21CrossRefGoogle Scholar
  3. Kim J-C (1989) Trade in used goods and durability choice. Int Econ J 3:53–63CrossRefGoogle Scholar
  4. Shinkuma T (2007) Reconsideration of an advance disposal fee policy for end-of-life durable goods. J Environ Econ Manage 53:110–121CrossRefGoogle Scholar
  5. Swan PL (1970) Durability of consumption goods. Am Econ Rev 60:884–894Google Scholar
  6. Swan PL (1971) The durability of goods and regulation of monopoly. Bell J Econ 2:347–357CrossRefGoogle Scholar
  7. Thomas VM (2003) Demand and dematerialization impacts of second-hand markets: reuse or more use? J Ind Ecol 7:65–78CrossRefGoogle Scholar
  8. Waldman M (2003) Durable goods theory for real world markets. J Econ Perspect 17:131–154CrossRefGoogle Scholar

Copyright information

© Integrated Research System for Sustainability Science, United Nations University, and Springer 2009

Authors and Affiliations

  1. 1.Graduate School of EconomicsKyoto University, Japan Society for the Promotion of ScienceKyotoJapan

Personalised recommendations