The Fishery Resource: Biological and Economic Models

1. The Fishery Resource: Biological and Economic Models Monday, April 18

2. G S S The Biological Model Note: This is a static model in the sense that only one stock size can exist at a time. POPULATION GROWTH (change in stock size) FISH STOCK or POPULATION

3. C S S To maintain a particular population, catch rate (C) cannot exceed growth rate (G). GROWTH or CATCH RATE STOCK or POPULATION

4. Steady-state population – with no human impact MSY Smsy Sss Maximum Sustainable Yield – the largest catch rate that can be sustained without reducing fish stock. GROWTH or CATCH RATE STOCK or POPULATION

5. GROWTH or CATCH RATE FISH YIELD FISH STOCK or POPULATION FISHING EFFORT Zero fishing effort means maximum (steady-state) population Impact of fishing effort on the fish stock:

6. YE1 C1 e1 Relationship between population, effort and catch Growth/Catch 0 Population Fishing Effort Catch per unit of effort is proportional to population

7. YE2 C2 YE1 e1 e2 Relationship between population, effort and catch Growth/Catch C1 0 Population Fishing Effort Catch per unit of effort is proportional to population

8. YE3 Sustainable yield fct. YE1 C3 e1 e3 Relationship between population, effort and catch Growth/Catch YE2 C2 C1 e2 0 Population Fishing Effort Catch per unit of effort is proportional to population

9. MSY Sustainable Yield Function Fish Yield Fishing Effort (e.g. number of boats)

10. Total Revenue = PRICExYIELD = PxQ Sustainable Total Revenue Function Fish Yield x Price TR Fishing Effort (e.g. number of boats)

11. Total cost = cost per boat x number of boats $ TC TR Fishing Effort (e.g. number of boats)

12. The Economic Model – what is the economically efficient level of effort? $ Where TR – TC is the greatest. TC TR Fishing Effort (e.g. number of boats)

13. Review: What does maximum net returns (TR-TC) say about MR and MC? MC is the slope of the TC curve. MR is the slope of the TR curve

14. Ee The Economic Model – what is the economically efficient level of effort? $ Point of Tangency – where MC=MB TC TR Fishing Effort (e.g. number of boats)

15. Static Efficiency • MB=MC • TR exceeds TC by the largest amount • Resource owner earns rent • Each year is independent • Yield is sustainable • Discount rate=0

16. Growth/Catch $ TC TR e* 0 Population Fishing Effort Equilibrium Population

17. Dynamic Efficiency • If discount rate is greater than zero (e.g. opportunity cost of capital invested in boats and equipment) • Will want to increase effort and catch in current period • Higher catch rate leads to lower population, lower future catch rates • Future equilibrium possible at lower population and lower catch rate

18. Growth $ TC TR r=0 r>0 0 Population Fishing Effort

19. What if discount rate is infinitely large? • Future is totally discounted (there may be no future) • This is the open access situation • No limits to access • Other fishers observe rents being earned and enter the fishery • Catch continues until TR=TC (zero rent)

20. TC Technological change – lowers cost of fishing effort, increases pressure on fishery, further reduces population $ TC TR Fishing Effort (e.g. number of boats)

21. Growth $ TC TR 0 Population Fishing Effort

22. Policies to limit fishing effort • Territorial use rights in fisheries (TURF) • Limited entry • Limited effort • Catch limits – total allowable catch (TAC) • Individual fishing quotas (IFQ) • Individual transferable quotas (ITQ) • Marine Reserves • Demand reduction/price signals