To Discard Or To Co-Produce By Recycling Waste: An Illustrative Analysis Involving Output Constraint

This theoretical paper investigates a multi-market Cournot model where a particular firm may process its waste from the primary market to sell them as co-products on a secondary market. Unlike the usual models found in the jointness in production literature based on costs and economies of scope, our model introduces the technical relationship between both outputs as a physical output constraint. We show the conditions under which a co-producing strategy is optimal for the firm. We find that an optimal share of waste processing depends on the structural conditions of the two markets.