The paper shows that a monopolistic primary producer of a recycleable material will choose to
preempt market entry by competitive recyclers unless the cost of producing virgin ingot is very
high compared to the cost of reconditioning used material. Unlike earlier results, it is shown
that in the absence of transaction costs on scrap sales competition by independent recyclers fails
to reduce price below its full-monopoly level. Moreover, if transaction costs are present, the
mere threat of entry by independent recyclers may raise the price above thal level.