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academies
Journal of Environmental Waste Management and Recycling | Volume 1
March 05-06, 2018 | London, UK
Recycling & Waste Management
5
th
International Conference on
D
emand uncertainty may be a significant barrier for
firms to enter the market. This study suggests that
an establishment of a monopoly which absorbs demand
uncertainty by commitment to determine a long-term stable
price, may be efficient by reducing the uncertainty level. An
economic model examines the social welfare consequences
of establishing such a monopsony in the waste recycling
market in Israel. The model provides a good description of
many other markets with high entry cost and price volatility.
The results show that an establishment of amonopsony in the
waste recycling market could be an efficient process from a
social welfare perspective (welfare increasing); this depends
on the market’s uncertainty level and the technological
changes resulting from eliminating uncertainty. In the case
study shown in Israel, creating a regulation that allows
larger municipalities to sell the waste at competitive prices
(international market prices) and allows small municipalities
to recycle at a monopsony price, will lead to improved social
welfare. The novelty of this study stems from the proof that
a monopsony may increase the market size in markets with
high levels of uncertainty, thus increasing the consumers
benefit. A monopsony creates “certainty benefits” by
reducing the risk premium arising from price fluctuations and
the entrance of new players, and although it gains excessive
profits, the benefit of reducing uncertainty may be greater
than the loss of a monopolistic exploitation.
e:
doron@pareto.co.ilCan a monopoly increase the welfare of its consumers?
Doron Lavee
Pareto Group, Israel