Price Ambivalence on the German Waste Paper Market. Stylized Facts and a Dynamic Model
14 Pages Posted: 13 Jan 2008
Date Written: April 2002
Since 1990 the price for low quality waste paper on the German market is characterized by price ambivalence, i.e. it is at times positive and at times negative. The underlying reason is given by three institutional and technical characteristics of the market: (i) As a result of waste management laws the supply of waste paper is mostly independent of its price and its demand. (ii) Disposal of waste paper is not free but generally costly, e.g. by dumping or incineration. Alternatively, it may be used as a secondary resource in the production of new paper. (iii) The use of the secondary material as a productive input by the paper industry is technically limited. We develop a simple dynamic model of the German waste paper market compatible with the institutional and technical characteristics, and show how price ambivalence occurs.
Keywords: price ambivalence, waste paper, secondary resources, costly disposal, environmental law
JEL Classification: L73, K32, Q24
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