Demand and Dematerialization Impacts of Second‐Hand Markets

Summary The potential for second‐hand markets to reduce demand for new goods is investigated. Using a variant of an economic model originally developed by Anderson and Ginsburgh, the physical implications for material use are explored. The second‐hand market grows if transaction costs decrease or if product lifetime increases. In this model, growth of the secondhand market reduces demand for new goods if there are waste used goods that can be brought into the market. But if there is not a ready supply of waste used goods, growth of the second‐hand market can increase demand for new goods, thereby increasing material consumption. Moreover, even when second‐hand sales reduce demand for new goods, it is typically not on a one‐for‐one basis. The extent to which the purchase of used goods replaces the purchase of new goods is shown to be an explicit function of the relative value provided by used versus new goods.