International Journal of Waste Resources

Can a monopoly increase the welfare of its consumers?

4^th World Congress and Expo on Recycling

July 27-29, 2017 | Rome, Italy

Doron Lavee

Tel-Hai College, Israel

Keynote: Int J Waste Resour

Abstract:

Demand uncertainty may be a significant barrier for firms to enter the market. This study suggests that an establishment of a monopole 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 a monopsony 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.

Biography :

Doron Lavee holds a PhD in Public Economics from the Ben-Gurion University, an MA in Economics and an MBA in Business Administration and Economics from the Hebrew University. He is a member of the Department of Economics and Management at Tel-Hai Academic College. He also serves as a Partner and General Manager of Pareto Group Ltd. He is a well-known expert with over 22 years of experience in economic and environmental consulting, financial advisory and strategic consulting in various fields, including issues related to economic efficiency and the periphery. He has extensive experience in managing complex projects and large-scale environmental economic consulting and conducting projects for the public and government sectors, including government ministries, local authorities, government corporations and public agencies.

Email: doron@pareto.co.il