Extended Producer Responsibility (EPR) and Remanufacturable Product Design

Abstract

The paper explores optimal upstream design and price choices by uncoordinated and coordinated firms in response to Extended Producer Responsibility (EPR) legislation. We model a single manufacturer supplying a remanufacturable, durable good to a single customer. We analytically investigate how various attributes of EPR, in terms of the magnitudes of environmental costs during product use and waste disposal costs post customer-use, the distribution of waste disposal costs between the manufacturer and the customer, design standards, and recovery/reuse requirements, influence upstream design choices of performance and remanufacturability by the manufacturer, given that the customer makes equipment replacement decisions optimally. We present contracts which can help coordinate the supply chain, since coordination results in environmentally superior product design as well as higher supply chain profit.