Brown Bag Seminar: Thuc Huan Ha

 Social Welfare and the Rebound Effect of the Scraps Collection System

Thuc Huan Ha, CORE, Université catholique de Louvain

In a simple two-period model, we examine the interaction between an extractor and a recycler competing in an industry, facing different rates of scraps collection and recycling costs. Along the values of the collection rate, this simple model shows a discontinuity in the extractor's reaction function, thus in the quantity of resource extracted and social welfare. We find that, in different situations, the society can be better or worse off following an improvement of the collection system and that whenever the society is better off, there exists a rebound effect of an improvement of the collection system, when effort to increase recycling actually leads to over-extraction of natural resource.