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Recycling Target Policies and R&D Cooperation in an Imperfect Competition Market

Satoshi, Honma

Ming-Chung, Chang

Discussion Paper

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The purpose of this paper is to discuss the issue the government¡¦s recycling target rate.  This ideal stems form the Japan¡¦s Recycling Law and Japan¡¦s resources recycling market.  We employ three kinds of two-stage game models to analyze this issue:  non-cooperative model, firm-wide cooperative model, and within-firm cooperative model.  In stage 0, the government sets a recycling target rate.  In stage 1, two firms simultaneously decide R&D investment level.  In stage 2, two firms engage in a Cournot competition.  We conclude that the social welfare in the within-firm cooperative model is higher (lower) than that in the firm-wide cooperative model when the recycling target rate is low (high).  Besides, the government should set a recycling rate is higher than 50% when the marginal environment damage is large.  Finally, we suggest that the Japan government should encourage firms to do a join-adventure in R&D since it will create a higher social welfare than that in current resources recycling market.

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