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1 Basic Bioeconomics Model of Fishing. 2 Objectives of lecture Introduce you to basic bioeconomic analysis; Introduce you to game theoretic applications.

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Presentation on theme: "1 Basic Bioeconomics Model of Fishing. 2 Objectives of lecture Introduce you to basic bioeconomic analysis; Introduce you to game theoretic applications."— Presentation transcript:

1 1 Basic Bioeconomics Model of Fishing

2 2 Objectives of lecture Introduce you to basic bioeconomic analysis; Introduce you to game theoretic applications to the study of shared fish stocks.

3 3 The Fishery Natural Component Human Component

4 4 Catch per unit of fishing effort (CPUE) is the total catch divided by the total amount of effort used to harvest the catch. CPUE = c/E Catch per unit effort

5 Global catch and effort *Effective effort indexed on 2000 based on average 2.42% increase annually Effort (GW or watts x 10 9 ) Catch (million tonnes) Year 5 10 15 20 25 10 20 30 40 50 60 70 80 90 195019551960196519701975198019851990199520002005 Catch FAO Fisheries Statistics

6 Global catch and effort *Effective effort indexed on 2000 based on average 2.42% increase annually Effort (GW or watts x 10 9 ) Catch (million tonnes) Year 5 10 15 20 25 10 20 30 40 50 60 70 80 90 195019551960196519701975198019851990199520002005 Catch Effective effort* Watson et al. (2012)

7 Classical Management Problems Overfishing; Overcapacity; Low or negative profits. Can you predict the above using only cpue and/or fishing mortality models? Nope! Bioeconomic models needed to predict these results!

8 These undesirable outcomes are the result of Individually Rational, but Non-cooperative Behavior

9 9 Issues in fisheries economics Fish as natural capital in a broad sense; Fish as common property resource; Externalities Tragedy of the commons Private property; Need for regulation; Decision making over time.

10 10 Fish as natural capital in a broad sense The natural environment contains the natural resources essential to life on earth; Natural resources provide inputs to our economic system; By and large economists see natural resources as similar to human made capital.

11 11 Economic efficiency and Bioeconomics

12 12 Economic efficiency Maximum profit subject to sustainability; Profit = Total Revenue – Total Cost; With economic efficiency, profit is maximized.

13 13 A static single species model Fisheries biology – the logistic model; The optimal harvest – equilibrium catch; The maximum sustainable yield; Sustainable yield as a function of effort; Max Profit= max(TR-TC):=Maximum Economic Yield; Profit=TR-TC=0:=Bionomic equilibrium.

14 The Basic Bioeconomic model MEY MSY Bionomic equilibrium (BE) Total cost of fishing effort (TC) Total Revenue (TR) Fishing effort (E) TR & TC ( $) E1E1 E2E2 E3E3 Max. rent Gordon Schaefer bioeconomic model

15 Bioeconomic Models (1) Biological Model: Net annual change of biomass = Growth + Recruitment – Nat. Mortality – Catch (2) Economic Model: Net annual revenue = Sales income - Cost

16 R = pH – cE Schaefer Catch Equation: H = qEx (Highly Dubious!) Therefore R = (pqx – c) E Bionomic Equilibrium: Under open access, fishery reduces the stock level x until R = 0, i.e., x = c/pq Predictions: Zero rents; overfishing ( if c/p low).

17 Numerical example: Bo = 1,000,000 t q =.001 / vessel yr c = $ 500,000 / vessel yr Price p ($/tonne)x (Bionomic Eq.) 5001,000,000 t 1,000 500,000 t 5,000 100,000 t What is Bionomic Equilibrium?

18 How to Fix It? TACs? Gear Regulations? Limited Entry? Vessel Buy-backs? Quasi-property rights through individualized (or community) quotas; MPAs; Taxes.

19 Bioeconomic modeling The objective of fisheries management: –Conservation of resources through time; –Economic viability and profitability; –Social objectives.

20 Economic rent/profit Total revenue = price*harvest (V). Total cost = unit cost of effort* effort (C). Economic rent = V – C.

21 Dynamic bioeconomic model Discounted economic rent (V-C) through time to obtain the discounted value of the economic benefits from the fishery.

22 22 Decision making over time Natural resource (NR) use involves decision making over time: –How much oil or gold should be extracted from a mine this year, how much next year, etc? –Should salmon on the west coast of Canada be harvested intensively this year or not at all? Time is important because the supply curve of NRs are always shifting due to: –Depletion of non-renewable resources and –biological and physical changes in renewable resources.

23 23 Hence, a dynamic rather than a static analysis is required to analyze natural resource use in most cases; Interest or discount rates are a crucial link between periods in dynamic models of NR use; Discount rate vs. discount factor; Present value vs. current value. –Introduce your quiz!

24 Thank for your attention


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