Spring 2015 Seminar Series

DATE: 3/5/15
LOCATION: E51-395
TIME: 4:15pm
Reception immediately following

SPEAKER:
Beril Toktay

TITLE
An Operations Lens on the Effectiveness of Extended Producer Responsibility Legislation

ABSTRACT
Extended Producer Responsibility (EPR) is a policy tool that holds producers financially responsible for the post-use collection, recycling and disposal of their products. Many EPR implementations are collective – a large collection and recycling network (CRN) handles multiple producers' products in order to benefit from scale and scope economies. The total cost is then allocated to producers based on metrics such as their return shares by weight. Such weight-based proportional allocation mechanisms are criticized in practice for not taking into account the heterogeneity in the costs imposed by different producers' products. The consequence is cost allocations that impose higher costs on certain producer groups than they can achieve independently. This may lead some producers to break away from collective systems, undermining cost efficiency, or cause them to underinvest in design-for-environment efforts within the collective system, undermining design effectiveness. We develop a cooperative network game model of producer participation in a collective system, embedded in a bi-form game that models the initial design investment. We propose cost allocation mechanisms to improve on current practice and study their value in the context of a Washington State case study. Our analysis identifies a critical trade-off between design and participation incentives, with implications for the effective design of EPR implementations.