An application of the market microstructure theory to markets for recyclable products

This paper describes competition between two firms which produce recyclable products, formulating a theoretical model to describe such competition in terms of the market mairostructure theory as well as its computer simulations. From the theoretical analysis of the market, we observed that the market price will increase and the transaction quantity will decrease by introducing the cost for disposing or processing wastes. Next, we examined several strategies of firms. The prices at Bertrand equilibrium eliminates the profit of a firm and monopoly prices obtained large profit in a round robin competition of the strategies. We also examined a tit-for-tat like strategy, however it could not earn the better result. We show a basic model of a duopolistic market with recycling process and some results of strategies