The way I see it, there are two ways to maximise material value, and it depends on how you measure value; value recovered per cup, or total value recovered. That is, you could recover 100% of the value from 10 cups, or 10% of the value from 100 cups, yet the recovered value remains the same.
The following solution seeks to maximise the total value recovered.
It is however, worth noting that the following solution theoretically grants exponential total recovery value, if recovery value per cup increases at any rate. Thus this solution should be considered in conjunction with a solution that also boosts the recovery value per cup.
In order to maximise total value recovered, we need to maximise the units of cups collected.
This is not a new challenge however, for decades initiative after initiative has attempted to incentivise consumers to dispose of their recyclable waste ethically. Why? Well to maximise the units collected and therefore maximise recycling efforts.
Of recent, we have seen things like New South Wales bottle recycling initiative ‘Return and Earn’ which will pay citizens $0.1 (AUD) for every eligible plastic bottle they place in a designated drop off device.
Yet, having to collect 35 bottles in order to be able to purchase a small cup of coffee hardly seems like a good deal in modern society. The marginal benefit when compared to marginal cost often doesn't add up for most people after a 12 hour day at work.
But consider instead why do so many people play the lottery? Because it’s fun! For a dollar or two, you buy the chance to dream. Big. This remarkable bargain illustrates a phenomenon — a probabilistic oddity — that economists call 'skewness'. Skewness occurs when decisions are made based on the belief that there is some probability that a big prize could be won, even if it corresponds with very low odds.
Skewness, in conjunction with loss aversion essentially translates into the very plain English of, people would rather have a small chance at a life-changing payout, than an almost certainty of a pittance.
What if we modified the 'Return and Earn concept' to trade certain pittance for small probabilities of life changing payouts? What if instead of being guaranteed a payout of for example $0.1 AUD like 'Return and Earn', we instead aggregated the recovered value of all cups collected in a week, a month, or a year and distributed some margin, say 1% for example, to a lucky recycler?
This is essentially an arbitrage - when there exists a zero-cost portfolio (or security) that yields anon-negative payoff for sure, and with the possibility of yielding a strictly positive payoff. But for the sake of simplicity we can call it a no-lose-lottery. You wouldn't lose anything buy putting a cup in one of these machines but you could potentially win 1% of the total pooled value of recovered materials.
Some quick thought-experiment type calculus will illuminate why the concept of a no-lose-lottery is best utilised at the scales we are concerned with.
As stated in the brief, some 250 billion cups are distributed annually.
Let's be conservative and estimate that the implementation of a no-lose-lottery program could incentivise 2 out of every 10 people who use a fibre cup to recycle them at designated locations.
Thats 50 billion cups returned annually. Assume we can get a 2 cent salvage value from each cup (on average), that's $1 billion in annual total recoverable value. Imagine then that 1% of that $1 billion is dedicated for prize money. $100 million in prize money that is.
Beyond this point It doesn't really matter how you cut the cake; it could be a single payment to one person, 5 payments to 5 people, or 10 payments to 10 people. The point remains, under this scheme individuals could potentially win millions of dollars for simply disposing of their cups.
I think if we're really honest with ourself, it is hard to imagine a scenario in which we could be so unmotivated as to turn down a free lottery ticket which could win us millions of dollars. Imagine if we got that chance with every cup of coffee.
I submit that this solution will maximise total recovered value by providing an accessible arbitrage opportunity for all consumers which capitalises on our own tendency of skewness and loss aversion.
Purchase a fleet of sensor-based reverse vending machines, from companies such as Norwegian 'Tomra' and place them in select outlets of the challenge sponsors.
The financial payout aspect obviously won't entail being handed a bag of cash on the spot, but rather operate much more like an actual lottery payout. That is, some sort of receipt is provided to the winner to confirm that they won. This receipt is then taken to a designated location at which subsequent transfers can take place.