On the Effects of Buy-Back Policies: A Model of the Smartphone Circular Economy

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Abstract
This article develops a simple model of the smartphone circular economy where the buy-back price offered to consumers is the main control variable. The model explicitly integrates refurbishment, recycling, and premature phone replacement encouraged by buy-back incentives. We distinguish three types of smartphones: premium, basic, and refurbished premium phones. Furthermore, consumers are segmented by buy-back sensitivity: sensitive users tend to return their phones and shorten their device lifespan, while non-sensitive users keep their phones longer. Additionally, refurbished consumers can buy new phones in case of insufficient supply. Our analysis reveals that with realistic parameters, there exists an optimal buy-back level that minimizes CO2eq. emissions and waste, and this optimum coincides with the equilibrium between supply and demand on the refurbished market. However, depending on the system parameters, negative effects can be observed. For example, if most components are replaced during refurbishment, emissions increase with the buy-back. More generally, our results highlight the importance of eco-design. While the model is applied to smartphones, its structure is generic and can be adapted to other products with refurbishment and buy-back incentives.

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