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Fisheries and Experimental Economics aka “ The Beans Game”

Fisheries and Experimental Economics aka “ The Beans Game”. Gunnar Knapp Jim Murphy. Rent Dissipation. Economic Rent Net value from the use of a resource Earnings or profits = ( Quantity harvested x Price received) – Cost of harvest Dissipation Waste by misuse, squander Rent Dissipation

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Fisheries and Experimental Economics aka “ The Beans Game”

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  1. Fisheries and Experimental Economicsaka “The Beans Game” Gunnar Knapp Jim Murphy

  2. Rent Dissipation • Economic Rent • Net value from the use of a resource • Earnings or profits • = (Quantity harvested x Price received) – Cost of harvest • Dissipation • Waste by misuse, squander • Rent Dissipation • Loss of earnings due to inefficient choices • Due to the rules or policies governing the fishery

  3. Sources of rent dissipation • RENT = (Quantity harvested x Price received) – Cost of harvest Demo #1Resource Driven Demo #3Value Driven Demo #2Cost Driven

  4. Demo #1 – Resource-driven rent dissipation • 3 periods • At the end of each period, amount in bowl 2x • Up to capacity of the bowl • Efficient outcome • Periods 1 & 2: harvest ½ • Period 3: take it all (no future) • View results….

  5. Tragedy of the Commons • Conditions for successful self-governance of shared resources • Hundreds of experiments • “local” fisheries can avoid tragedy, but may also overharvest. • Competitive, commercial fisheries likely to over-harvest • Why? • Resource-driven Rent Dissipation Elinor Ostrom 2009 Nobel Prize Rent = Quantity harvested x Price received – Cost of harvest Overharvesting reduces biomass

  6. Evolution of fisheries management institutions • Open access / Common-pool resource • Over-fishing  Tragedy of the Commons • Regulated Restricted Access (“competitive fishery”) • Aggregate Quota (addresses CPR problem) • Vessels compete for share of Aggregate Quota • Restricted access to fishery (harvesting permit) • Limits on use of some inputs, but not all • Derby-style “race for fish”

  7. Demo #2 – Cost Driven Rent Dissipation • Choose a spoon • Larger spoons cost more, but can also harvest more • What is the efficient outcome? • Your results… • Excessive use of inputs (“over-capitalization”) • Race for fish or “derby”  Spoons are bigger & more costly than necessary • Getting in each other’s way, spills Rent = Quantity harvested x Price received – Cost of harvest Excessive use of inputs increases costs

  8. Harvesting experiment • 8 subjects per group • 20 cups of beans in large bowl • Revenue is $1/cup. • Subjects need to purchase “gear” to harvest the beans. • Select a measuring cup • Larger gear costs more.

  9. Gear (measuring cups)

  10. Nonlinear social dilemma payoff table

  11. Concerns about payoff tables • We don’t live in a world of payoff tables • Frames how a person should think about the game • A lot of numbers, hard to read • Too abstract??

  12. We’re not interested in cooperative behavior

  13. Pitcher on floor 20 cups of pinto beans

  14. Treatments • Derby • Subjects compete for a share of total harvest • Individual Quota • Subjects guaranteed a fixed share

  15. Derby video

  16. T1. Derby Results

  17. Percent of beans that are spilled in Derby Mean = 27% $5.40 per period spilled (= $0.68/person)

  18. Derby Earnings – Rents are almost fully dissipated Mean = $0.15 17% were < 0

  19. Salmon Fishing in Bristol Bay, Alaska • Competing for limited space in the best place to catch fish—getting in each other’s way.

  20. New 32’ boat (1990s) Old 32’ boat (1970s) In Bristol Bay, although boats are restricted to 32’ in length, over time fishermen have built wider and taller boats in an effort to catch a larger share of the available fish. Boat costs have increased without any corresponding increase in catch. (Photograph by Norm Van Vactor)

  21. Inefficient use of gear!

  22. Sitka herring fishery

  23. Quota video

  24. Near – Far Beans Game

  25. Experimental design . . . This subject’s “far pitcher” • All subjects use the same size scoops and have no costs. • Subjects can choose between delivering to a “near” pitcher or a “far” pitcher • They get paid a higher price for beans delivered to the far pitcher • But because it takes longer they may not harvest as much if they deliver to the “far” pitcher “near pitchers”

  26. Three short video clips of the experiment • CLIP #1: A “choice” round with a low price for the “far” pitcher. Most subjects deliver to their “near” pitcher. Note that subjects fish as they can and spill a lot of beans. • CLIP #2: A “choice” round with a high price for the “far” pitcher. Some subjects deliver to their “far” pitcher. Note that subjects fish as they can and spill a lot of beans. • CLIP #3: A “quota” round. Most subjects deliver to the “far” pitcher. Note that subjects fish more slowly and carefully and spill fewer beans.

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