[Séminaire Eat and Think] Using deposit systems to manage reusable packaging efforts - IGR-IAE Rennes

Abstract :
Reusable packaging has emerged as a promising strategy to mitigate plastic waste, yet practical implementation remains challenging. Consumers face upfront deposit payments and the inconvenience of returning empty packaging, while firms incur additional costs related to collection and cleaning. This paper sheds light on a firm’s decision to introduce products in reusable packaging under a deposit– refund system. We model a firm that offers products in both disposable and reusable formats and jointly chooses the product price and the deposit fee for the reusable option. The model incorporates consumer heterogeneity in both product valuations and return-related hassle costs. We characterize the firm’s optimal pricing policy and identify the market conditions under which offering reusable packaging is profitable. We show that product price—beyond deposit fees—impacts the return rate of reusable packaging. A sufficiently high price enables the firm to segment the market by directing high–hassle–cost consumers toward the disposable option while offering the reusable option only to low-hassle consumers. This mechanism enables the firm to achieve full return rates without imposing large deposit fees. When consumers’ willingness to pay for reusable solutions is limited, the firm relies on this segmentation strategy and restricts the reusable option to low-hassle consumers. As willingness to pay a premium increases, however, the firm expands reusable offerings to high-hassle consumers, increasing adoption but reducing return rates and diminishing environmental outcomes. We also examine policy interventions aimed at promoting reuse and show that banning or taxing disposable packaging can unintentionally lower return rates for reusable packaging and undermine environmental benefits.