Modelling the circular economy: Introducing a supply chain equilibrium approach

Bart Lahcen*, Johan Eyckmans, Sandra Rousseau, Yoko Dams, Jan Brusselaers

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review


The circular economy (CE) has gained prominence in recent years in government and business policies, as well as academic research. Yet, its alleged wholesomeness is increasingly questioned and few quantitative studies include both the outer (e.g. recycling) and inner circles (e.g. reduce or reuse), respectively the ex-ante least and most efficient CE strategies. By developing a supply chain equilibrium model, based on general equilibrium theory, this paper presents a modelling framework where a product-service system is introduced as a circular alternative to conventional products. Through generalised prices that cover inner and outer circle variables, targeted economic and fiscal policy measures affect overall price levels and, by consequence, operational levels of the supply chain. The rationale behind this approach relies on combining material and economic efficiency by integrating material/product life cycles with market interactions. To illustrate its performance, the model examines the rollout of a reusable plastic bottle initiative in Belgium. The results show that if circular products are perceived as substitutes for conventional products, well-targeted policies can reduce material use substantially. Furthermore, coordinating circular policies along the supply chain can improve their outcomes. However, the absence of CE data impedes model development and risks undermining the validity of the results.

Original languageEnglish
Article number107451
Pages (from-to)1-12
Number of pages12
JournalEcological Economics
Early online date18 Apr 2022
Publication statusE-pub ahead of print - 18 Apr 2022

Bibliographical note

Funding Information:
This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.

Publisher Copyright:
© 2022 Elsevier B.V.


  • Circular economy
  • Economic efficiency
  • Equilibrium model
  • Material efficiency
  • Policy analysis
  • Product-service system


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