A Theory of Return for Deposit: Economic and Logistical Implications of Legislation

by Douglas Lambert, Jeffrey Towle



This article describes business' problem, using Michigan as an example, and develops a general theory of return for deposit that can be used to predict the outcome of alternative plans for implementation of return for deposit legislation. In the general election of November 1976, Michigan voters passed the proposed bottle law. The proposed law would: (a) prohibit the use of nonreturnable bottles and cans for soft drinks and beet for off-premise consumption; (b) Set up a requirement for cash deposits and repayment of deposits for softdrink and beer containers (c) Establish the use of metal soft drink and beer containers with nondetachable openers; (d) Establish fines for violation of the law by dealers, distributors and manufacturers. Two industries are directly affected by the bottle law: the soft drink industry and its associated container manufacturers, local bottlers, distributors, and retail outlets, and the beer industry, with similar but not identical institutions in the channel of distribution. The theory presented in this article is applicable to both industries, though the method of compliance with the law may be different, reflecting differences in the industries' structures. The theory of return for deposit includes certain reasonable assumptions about the forces on and consequent behavior of individuals and businesses. These are stated as self-evident truths (axioms) and collectively comprise the theory. The law was an outgrowth of an emotionally charged media campaign which emphasized the litter and waste caused by nonreusable beverage containers. It is possible that the industry may find that it is advantageous to lobby for a national bottle bill rather than to deal with the logistical problems associated with different laws. The nature of the lobby effort should reflect sound judgment and complete understanding of the law of return for deposits if it is to bring about legislation that is in the best interests of both consumers and industry.

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