Endogenous quality choice and environmental impact in a model of continual technological change

This model combines features of optimization and "bounded rationality" to consider firms' decisions in a vertically-differentiated products market. Those decisions impact the variety and level of technology available to consumers, as well as the effect of ongoing technological change on the natural environmental. Both consumers and producers attempt to optimize their choices given the limited information available to them. From the policy-maker's perspective, this model illustrates the trade-offs that exist in a dynamic equilibrium of product improvement and waste creation.

This agent-based model explores the interplay between a product's rate of technological change and its impacts on the natural environment through the waste created by product replacement. Technology proceeds endogenously through "market research" on consumers' preferences given the current level of embodied technology and proposed product introductions found through a stochastic research and development process. Investigating the question in this fashion allows an environmental impact to take into account the behaviors in which both firms and consumers engage as they consider trade-offs between the profit (for firms) or surplus (for consumers) created by producing new phones that replace the handsets currently in use. Historically, only a small percentage of mobile devices that are replaced find their way to recycling programs. Helping these devices come to rest in locations that minimize their toxic components' effects on land and water is important to policy makers. A variety of interventions can be considered, including end-of-life taxes and advance disposal fees to incentivize consumers' actions or related methods to incentivize producers decision-making. This model incorporates the analysis of policy interventions within the context of innovation decisions made by producers to create the devices and consumers to replace their existing devices.