SPATIAL COMPETITION IN OVERLAPPING SEASONAL FISHERIES: A BIOECONOMIC MODEL OF FISHERMEN AND REGULATORS

This paper develops a single-season dynamic game between fishermen and regulators. Fishermen maximize the NPV of profits by their location choice in a system with congestion, adjustment costs, and adaptive, quota-driven, site closures. Simulation results reveal feedbacks between site-choice and closure decisions and suggest the usefulness of spatial policy instruments in reducing congestion externalities and costly congestion-averting expenditures.Resource /Energy Economics and Policy,

Fisheries Production: Management Institutions, Spatial Choice, and the Quest for Policy Invariance

The fishery-dependent data used to estimate fishing production technologies are shaped by the incentive structures that influence fishermen’s purposeful choices across their multiple margins of production. Using a combination of analytical and simulation methods, we demonstrate how market prices and regulatory institutions influence a dominant short-run margin of production—the deployment of fishing time over space. We show that institutionally driven spatial selection leads to only a partial exploration of the full production set, yielding poorly identified estimates of production possibilities outside of the institutionally dependent status quo. The implication is that many estimated fisheries production functions suffer from a lack of policy invariance and may yield misleading predictions for even the most short-run of policy evaluation tasks. Our findings suggest that accurate assessment of the impacts of a policy intervention requires a description of the fishing production process that is sufficiently structural so as to be invariant to institutional changes.Ye

Strategic Joint Production Under Common-Pool Output Quotas: The Case of Fisheries Bycatch

We develop a simple game-theoretic model to explain the production decisions of firms when the production of a marketed good is complementary with the output of an associated good for which no market is available and the output of both goods is regulated by exogenously determined common pool output quotas. This scenario matches that of many fisheries in which regulators attempt to simultaneously manage harvests of targeted species and bycatch of other species through common pool quotas and seasonal closures. Under a competitive equilibrium, individual fishermen fail to fully account for the external effects of their harvest decisions on the season length, leading to excessive discards, drastically shortened seasons, and large shares of un-harvested quota for all but the smallest of fishery sizes. These results are robust for even very efficient (low-bycatch) fishing gears. We examine the sensitivity of our predictions to changes in output prices, discard costs, quota allocations and differing degrees of spatial correlation of target and bycatch species. Finally, we derive the optimal bycatch penalty function and describe its significance in light of various policy alternatives available to regulators.Resource /Energy Economics and Policy,

THE VALUE OF WATER AS AN URBAN CLUB GOOD: A MATCHING APPROACH TO HOA-PROVIDED LAKES

Urban lakes located in arid environments require large quantities of water to maintain their water levels, with much of this water associated with high opportunity costs. Many of these lakes are manmade and provide various amenities to surrounding residents. In this paper we use matching techniques to recover the average capitalized value of lakes to surrounding communities and differentiate between community members and adjacent households to recover heterogeneous treatment effects. Importantly, we consider the role of both unobservable and observable features of matching to recover heterogeneous capitalization across lake communities. Our results suggest that the capitalized value of lakes to community residents is highly heterogeneous and ranges from an annual value of -$29 to +$20 per homeowner per acre foot of water. These results suggest that small changes in water pricing could remove the surplus benefits of lakes to community residents.Matching, Treatment effects, Urban lakes, Capitalization, Environmental Economics and Policy, Political Economy, Resource /Energy Economics and Policy,

Rent Dissipation in Chartered Recreational Fishing: Inside the Black Box

A canvass of the resource economics literature of the last thirty years yields a limited number of applications of economic theory to the problems of recreational fishing, especially compared to the depth of contributions to commercial fisheries over this era. This neglect may be linked to the relatively short shrift given to the control of recreational fisheries (relative to commercial fisheries) by fisheries managers in the past. This asymmetry may be justified when recreational takes are sufficiently small to be negligible for the purposes of stock management. However, it has become increasingly clear that recreational mortality, far from being insignificant, is often comparable to or greater than the commercial mortality for many species (Coleman, et al., 2004). With fisheries managers scrambling to find solutions for the control of recreational mortality, economists have entered the policy arena promoting innovative rights-based policies that are grounded in the past successes of economic prescriptions for the management of commercial fisheries (Johnston, et al., 2007, Sutinen and Johnston, 2003). Despite the merits of these proposals, there remains a sense that findings from the commercial fishing experience may not be as immediately transferable to recreational settings as often imagined. In the first place, our understanding of the mechanisms of the rent dissipation process under open access is imperfect at best. Experience from the rationalization of commercial fisheries has yielded many surprises, with drastic behavioral changes occurring at unanticipated margins (Wilen, 2005). These experiences demonstrate the inadequacies of simple single-factor models in capturing the complexities of real-world rent dissipation. Second, while the recreational for-hire sector may seem similar to commercial fisheries operations in many ways, there are key differences that may limit our ability to readily transfer knowledge from commercial rationalization programs. These observations point toward the need for a more developed theoretical foundation in order to make sense of recreational fishery rationalization programs - such as those under consideration for the Gulf of Mexico - and their likely effects. As a step along this path, we develop a simple bioeconomic model of optimal and open access management for a for-hire recreational fishery. We restrict our attention to the for-hire sector for three reasons. First, charter and headboat trips are a substantial part of total fishing effort for many species and often contribute in a significant way to many coastal economies. Second, given the relative ease of observing fishing activities on for-hire vessels compared to solitary fishing trips, they are widely considered easier targets for regulation and are thus likely to be of some importance in recreational fisheries policy making over the near horizon. Finally, as we shall demonstrate, the interaction of consumer preferences with the supply behavior of vessel owners creates the potential for an array of fascinating distortions and feedbacks with great relevance for fisheries policy. Our model rests upon elements of the bioeconomic framework pioneered by McConnell and Sutinen (1979) and Anderson (1993). However, it extends their approach by incorporating a realistic and flexible theory of the choice of inputs of the for-hire fishing firm. This synthesis of traditional analytical bioeconomics with a production economics treatment of firm behavior is unique, both in commercial and recreational fisheries applications. Combining the supply and demand sides of the problem allows us to examine the long run distortions arising under open access in a manner that reflects feedbacks between angler preferences and the decisions of vessel owners. We find that open access conditions in charter fisheries lead to numerous distortions including excess investments in catch-augmenting inputs on vessels, excessive catch of target species and excessive entry of vessels (resulting in idle vessel capacity for a potentially substantial portion of the season). More subtle perverse incentives include the presence of too few anglers per vessel (due to incentives to reduce losses to catch rates due to congestion), possible underinvestment in valuable but non catch enhancing factor inputs and an incentive for anglers to land an excessive fraction of their catch to the detriment of the future stock. Many of these findings are reflective of recreational fisheries in the Gulf of Mexico and elsewhere. We then utilize our model to consider various options for the rationalization of chartered recreational fisheries. Interestingly, achieving the first best outcome requires a minimum of two policy instruments, a tax/quota on fishing mortality and a levy/quota on entry. The levy on entry is necessary to prevent new entry into a profitable fishery where all charter boat owners are fully employed leading to a situation of less than full employment of vessel capital and the inflation of industry-wide fixed costs. We discuss at length the problems of monitoring and enforcement for a system of tradable landings and discard quotas and discuss the merits of a single-quota system based on a single estimated mortality variable where both landings and discards are, to some degree, observable. Under this system, fishermen are able to exchange landings quota for discards at a prescribed relative mortality ratio. Vessels vie for certification into a discrete number of mortality classes (and thus discard/landings exchange ratios) based upon easily observed factors such as enforcement of quick catch and release behavior, use of gears with lower mortality characteristics and the employment of accepted post-catch techniques to enhance survival. Vessel owners would face positive incentives to achieve a high degree of certification because doing so would allow them to generate a greater number of landings for a given holding of mortality quota. This increases the effective number of anglers the vessel can serve with their holdings thus leading to an increase in the asset value of their quota - a gain they can capitalize on directly by serving more anglers or, indirectly, by selling their surplus quota.Resource /Energy Economics and Policy,