Price expectations and the supply of wastepaper

For some time the price response of the supply of wastepaper has been analyzed in terms of either static simultaneous equation models, or by the use of fairly ad hoc distributed lag models. This paper suggests that a model based on the price expectations of wastepaper suppliers is capable of explaining certain anomalies in earlier empirical work, and confirms the view that purely price-based policies to stimulate wastepaper recycling are likely to be ineffective. Not only is the supply of wastepaper insensitive to changes in price expectations, but the latter are themselves very slow to adjust to changes in actual prices.