7. Variability of fish stocks

Question 1

Q: What economic questions does stock fluctuations raise?

Answer 1

1. What is the optimal fleet capacity for fluctuating stocks?
   * Would it make sense to have a fleet large enough to take infrequent top catches?
2. Should catches be stabilized?
   * More even flow of raw material to processors and of products
   * Larger revenue if demand is price-elastic
   * Possibly more costly fishing

Question 2

Q: What are the components of a simple example of capacity choice?

Answer 2

• Surplus growth random & independent of stock
• Possible to catch surplus growth each year (total allowable catch, TAC)
• TAC evenly distributed between 0 and 0.9
• Production function of type Y = kE
• Each boat able to catch 0.1 (k = 0.1, E = number of identical boats)

Question 3

Q: What is the optimum fleet size?

Answer 3

value of marginal catch = marginal cost of boats (cost per boat if constant)
* Open access fleet (competition for a given TAC): value of catch per boat = cost of marginal boat (cost per boat if constant)
* Open access fleet > optimum fleet

Question 4

Q: What does optimum fleet depend on?

Answer 4

• price of fish
• cost of boats
• probability distribution of catches
  Maximum TAC usually not worth while

Question 5

Q: What is a disadvantage for the model?

Answer 5

In reality, boatowners own catch quotas for different types of fish which do not vary in the same way and are correlated over time. Makes choice of optimal fleet capacity quite complicated.

Question 6

Q: Should catches from variable stocks be stabilized?

Answer 6

1. Look first at catch value
2. Compare stable revenue from a constant catch with variable revenue where catch fluctuates with the fish stock.
3. Same long-term catch.

Question 7

Q: When will catching of a variable stock be better than from a constant?

Answer 7

If the cost per unit of fish is sensitive to the size of the exploited stock, the cost of always catching a given quantity Y* = EY will be higher than the expected cost of variable catch, because it requires greater effort.

Question 8

Q: What are the quota regulations in Norway?

Answer 8

• Most Norwegian fisheries now regulated by boat quotas
• Transferable with certain restrictions
• Purchased quotas valid for 20 years
• Came as a result of crisis in the herring fishery (late 1960s) and the cod fishery (late 1980s) (see slide at beginning)

Question 9

Q: Why is Individual transferable quotas (ITQs) used?

Answer 9

A good way to deal with
a) variability of fish stocks and
b) choice of fishing capacity (fleet size)

Question 10

Q: Whats the outcome of ITQs?

Answer 10

1. Return on capital not necessarily higher, because quota value is part of denominator (value of capital)
2. Operating margin should improve (fewer boats taking the TAC)