Wasting innovation: barriers to entry and European regulation on waste electronic equipment

摘要

The European Directive on Waste Electric and Electronic Equipment 2002/96/EC distorts incentives in regulated markets. Treatment of 'historical waste'-i.e. products sold prior to 13 August 2005-is financed by all firms in the market at the time of disposal. This stimulates excessive pre-regulation output by incumbents for two reasons: a costs sharing effect and entry deterrence. Entry deterrence is achieved by raising the common costs of waste disposal. Entry is a main driver of innovation in the affected industries. The feasibility of a first best policy is discussed and an alternative rule superior to the status quo is presented.