The Fishery Resource: Biological and Economic ModelsSlide 2Slide 3Slide 4Slide 5Slide 6Slide 7Slide 8Slide 9Slide 10Slide 11Slide 12Slide 13Slide 14Static EfficiencySlide 16Dynamic EfficiencySlide 18What if discount rate is infinitely large?Slide 20Slide 21Policies to limit fishing effortThe Fishery Resource: The Fishery Resource: Biological and Economic Biological and Economic ModelsModelsMonday, April 18Monday, April 18POPULATION GROWTH (change in stock size)FISH STOCK or POPULATIONThe Biological ModelSGSNote: This is a static model in the sense that only one stock size can exist at a time.STOCK or POPULATIONGROWTH or CATCH RATETo maintain a particular population, catch rate (C) cannot exceed growth rate (G).SCSSTOCK or POPULATIONGROWTH or CATCH RATEMaximum Sustainable Yield – the largest catch rate that can be sustained without reducing fish stock.SssSteady-state population – with no human impactMSYSmsyImpact of fishing effort on the fish stock:FISH STOCK or POPULATIONGROWTH or CATCH RATEFISH YIELDFISHING EFFORTZero fishing effort means maximum (steady-state) populationFishing EffortPopulationRelationship between population, effort and catch0Catch per unit of effort is proportional to populationGrowth/CatchYE1e1C1Fishing EffortPopulationRelationship between population, effort and catch0Catch per unit of effort is proportional to populationGrowth/CatchC1YE1e1YE2e2C2Fishing EffortPopulationRelationship between population, effort and catch0Catch per unit of effort is proportional to populationGrowth/CatchYE2Sustainable yield fct.C2C1YE1e1e2YE3e3C3Fish YieldFishing Effort (e.g. number of boats)Sustainable Yield FunctionMSYFish Yield x PriceFishing Effort (e.g. number of boats)Total Revenue = PRICExYIELD = PxQ TRSustainable Total Revenue FunctionFishing Effort (e.g. number of boats)Total cost = cost per boat x number of boats$TRTCFishing Effort (e.g. number of boats)$TRTCThe Economic Model – what is the economically efficient level of effort?Where TR – TC is the greatest.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 curveFishing Effort (e.g. number of boats)$TRTCPoint of Tangency – where MC=MBThe Economic Model – what is the economically efficient level of effort?EeStatic EfficiencyStatic Efficiency•MB=MCMB=MC•TR exceeds TC by the largest amountTR exceeds TC by the largest amount•Resource owner earns rentResource owner earns rent•Each year is independentEach year is independent•Yield is sustainableYield is sustainable•Discount rate=0Discount rate=0Fishing Effort$Growth/CatchPopulation0TRTCe*Equilibrium PopulationDynamic EfficiencyDynamic Efficiency•If discount rate is greater than zero If discount rate is greater than zero (e.g. opportunity cost of capital (e.g. opportunity cost of capital invested in boats and equipment)invested in boats and equipment)–Will want to increase effort and catch in Will want to increase effort and catch in current periodcurrent period–Higher catch rate leads to lower Higher catch rate leads to lower population, lower future catch ratespopulation, lower future catch rates•Future equilibrium possible at lower Future equilibrium possible at lower population and lower catch ratepopulation and lower catch rateFishing Effort$GrowthPopulation0TCTRr=0 r>0What if discount rate is What if discount rate is infinitely large?infinitely large?•Future is totally discounted (there Future is totally discounted (there may be no future)may be no future)•This is the open access situationThis is the open access situation–No limits to accessNo limits to access–Other fishers observe rents being Other fishers observe rents being earned and enter the fisheryearned and enter the fishery–Catch continues until TR=TC (zero rent)Catch continues until TR=TC (zero rent)Fishing Effort (e.g. number of boats)$TRTCTCTechnological change – lowers cost of fishing effort, increases pressure on fishery, further reduces populationFishing Effort$GrowthPopulationTRTC0Policies to limit fishing effortPolicies to limit fishing effort•Territorial use rights in fisheries (TURF)Territorial use rights in fisheries (TURF)•Limited entryLimited entry•Limited effortLimited effort•Catch limits – total allowable catch (TAC)Catch limits – total allowable catch (TAC)•Individual fishing quotas (IFQ)Individual fishing quotas (IFQ)•Individual transferable quotas (ITQ)Individual transferable quotas (ITQ)•Marine ReservesMarine Reserves•Demand reduction/price signalsDemand reduction/price