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

POPULATION GROWTH (change in stock size) 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) G S S FISH STOCK or POPULATION

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

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

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

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

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

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

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

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

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

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)

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

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

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

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

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

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

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)

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

Growth $ TC TR Population Fishing Effort

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