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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 to the study of shared fish stocks.
3
The Fishery
Natural Component
Human Component
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• 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
Global catch and effort
*Effective effort indexed on 2000 based on average 2.42% increase annually
Effor
t (G
W o
r watt
s x
109 )
Catc
h (m
illio
n to
nnes
)
Year
5
10
15
20
25
10
20
30
40
50
60
70
80
90
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Catch
FAO Fisheries Statistics
Global catch and effort
*Effective effort indexed on 2000 based on average 2.42% increase annually
Effor
t (G
W o
r watt
s x
109 )
Catc
h (m
illio
n to
nnes
)
Year
5
10
15
20
25
10
20
30
40
50
60
70
80
90
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Catch
Effective effort*
Watson et al. (2012)
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!
These undesirable outcomes are the result of Individually Rational, but
Non-cooperative Behavior
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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.
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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.
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Economic efficiency and
Bioeconomics
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Economic efficiency
• Maximum profit subject to sustainability;
• Profit = Total Revenue – Total Cost;
• With economic efficiency, profit is maximized.
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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.
The Basic Bioeconomic model
MEY
MSYBionomic equilibrium (BE)
Total cost of fishing effort (TC)
Total Revenue (TR)
Fishing effort (E)
TR & TC ( $)
E1 E2 E3
Max. rent
Gordon Schaefer bioeconomic model
Bioeconomic Models
• (1) Biological Model:
Net annual change of biomass =Growth + Recruitment – Nat. Mortality – Catch
(2) Economic Model:
Net annual revenue =Sales income - Cost
R = pH – cE
Schaefer Catch Equation: H = qEx (Highly Dubious!)
Therefore R = (pqx – c) E
Bionomic Equilibrium:
Under open access, fishery reduces the stocklevel x until R = 0, i.e.,
x = c/pq
Predictions: Zero rents; overfishing ( if c/p low).
Numerical example:
Bo = 1,000,000 tq = .001 / vessel yrc = $ 500,000 / vessel yr
Price p ($/tonne) x (Bionomic Eq.)
500 1,000,000 t1,000 500,000 t5,000 100,000 t
What is Bionomic Equilibrium?
How to Fix It?
• TACs?• Gear Regulations?• Limited Entry?• Vessel Buy-backs?• Quasi-property rights through individualized (or
community) quotas;• MPAs;• Taxes.
Bioeconomic modeling
• The objective of fisheries management:
– Conservation of resources through time;– Economic viability and profitability;– Social objectives.
Economic rent/profit
• Total revenue = price*harvest (V).
• Total cost = unit cost of effort* effort (C).
• Economic rent = V – C.
Dynamic bioeconomic model
• Discounted economic rent (V-C) through time to obtain the discounted value of the economic benefits from the fishery. rateiscount
)1(
1
)(0
d
dwhere
CVdNPVT
ttt
t
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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.
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• 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!
Thank for your attention
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