Efficient Management of Product Durability and Recyclability under Utilitarian and Chichilnisky Preferences

Abstract

In a dynamic general equilibrium vintage model we explicitly consider the relationship between the product attributes “durability” and “recyclability”. Efficient management in the case that green design markets fail is analyzed both under Utilitarian and Chichilnisky preferences. It turns out (a) that durability may be inefficient even in a perfectly competitive economy in which environmental externalities are absent, (b) that the efficiency-restoring tax-subsidy schemes crucially depend on the kind of preferences, and (c) that changing the property rights for consumption goods and residuals is a promising policy option to overcome market failure independent of the kind of preferences.