An Investigation of Zero Waste Management Based on Perceived Consumer Effectiveness

This study examines viability of zero waste manufacturing model in which manufacturing firms recycle parts and reuse materials to make a new product. Grounded on an economic model, we identify the conditions under which the monopolistic firm's zero waste action brings profit. We examine the profitability of the versioning strategy in the presence of two consumer types, including primary and eco-conscious consumers. The eco-conscious consumers are specified by a perceived consumer effectiveness that explains the consumers’ consideration and inclination to solve the prevalent societal problem. We find that offering single version is dominant over offering both versions under certain conditions, even though we also verify that the preeminence of versioning is usually applicable. We further analyze the impact of subsidies for the zero waste on firm’s profit and the social welfare. We find subsidies do not always benefit the manufacturer; if the subsidy does not exceed a certain level, it does not increase social welfare. We show that the high subsidy does not guarantee increasing social welfare when the market structure is known. Contrary to the manufacturer profit, social welfare can increase with lower subsidy level.