Essays on environmentally responsible operations

Abstract

This thesis consists of three essays. The study in the first essay empirically examines the effect of hazardous substance rankings on reductions in emissions. Drawing data from the biennial Substance Priority List from the US Agency for Toxic Substances and Disease Registry and the Toxics Release Inventory from the US EPA and employing a panel model with fixed effects to control for various factors, the study finds that public information dissemination on the relative hazards of chemicals is effective, as indicated by the significant associations between increases in the relative assessed hazard levels of chemicals and greater subsequent emissions reductions, as well as the greater use of source reduction. As for the implications of operational leanness, the study finds that it may limit the ability of facilities to reduce emissions in response to in-creases in relative assessed hazard level. The study in the second essay analytically examines a durable-goods producer’s warranty-length decision in the presence of a secondary market. The study constructed a durable-goods model that captures the value-added by offering longer warranties in the context of a product with finite reliability and the implications of the presence of a secondary market. The model also incorporates the producer’s economic incentive to interfere with the secondary market through a buy-back program. The analytical results indicate that with respect to the reliability of used products, the benefit of offering longer warranties is non-monotonic in the presence of secondary markets. Also, secondary market interference significantly influences producers' warranty-length decisions. That is, in addition to the conventional wisdom that producers benefit from longer warranties when product reliability is a concern, producers engaging in secondary market interference may find that offering longer warranties is more profitable when used products are sufficiently reliable. The study in the third essay empirically tests predicted relationships from the previous essay. Linking secondary data from various sources regarding the US automobile market and applying the exploratory factor analysis and the panel data analysis, the study finds support for a U-shaped relationship between automobile producers' warranty lengths and their used-vehicle reliability. Specifically, automobile producers offer longer non-power-train warranties when the reliability of used vehicles is near an extreme, either low or high. In addition, producers' buy-back activities decrease with the reliability of used vehicles, and that the trade volume in the secondary market increases with the used-vehicle reliability.