AGEC/FNR 406 LECTURE 27

Fisheries, Part II

Static-efficient sustained yield

Gordon model (simplest approach)

Goal: determine a catch level that provides the largest net benefit

Solution: find output level where marginal cost and marginal benefit are equal (i.e. where the distance between total revenue and total cost is at a maximum)

Assumptions, part 1:

Benefits:Benefit determined by total revenue: TR = P * QP = Price

Market price reflects value to societyPrice per unit of catch is constant

(fishery represents small portion of the overall market)

Q = QuantityCatch per unit of fishing effort is proportional

to population

Costs:Cost determined by total cost: TC = FC + VC

(But here we ignore fixed cost (FC) which is a “sunk” cost)

Variable cost (VC) determined by “fishing effort” VC = labor + equipment + fuel + depreciation, etc. Total cost proportional to effort.

For given amount of effort, yield (Y) is proportional to population (X)

Assumptions, part 2:

1. Map the effort-catch relationship

2. Convert sustainable yield function to effort-based relationship

3. Create total revenue (benefit) function by multiplying catch*price

4. Combine total revenue and total cost to find optimal level of effort (MB=MC)

Four steps required:

Start with yield-effort relationship(Kahn, Figure 10.6)

Fish population (X)

Cat

ch (

C) YE3

YE1

YE2

E3 > E2 > E1

Catch rises with

effort and pop.

Step 1: map pop & effort into catch

Step 2: effort and sustainable yield

E2

C2

Fishing effort (E)

Cat

ch (

C)

C1

E1 E3

C3

As effort increases…catch rises then falls.Why? Higher catch reduces pop growth.

Compare with Logistic Growth Function(Kahn, figure 10.1)

Same shape, but x-axis is reversed

KX2

G2

Fish population (X) increasing

Gro

wth

of

popu

lati

on (

G)

G1

X1

Effort (E) increasing

Step 3: compute total revenue

Total Revenue = Catch x Price

Fishing effort (E)

Cat

ch (

C)

E2

C2

C1

E1 E3

C3

TR

Step 4: add total cost to find E*

Total Revenue = Catch x Price

Cat

ch (

C)

TC

Fishing effort (E)

E*

C*

TR}TR-TC

Summary of static-efficient sustained yield model

Efficient catch occurs where MC = MRMC is slope of cost curve

MR is slope of revenue curve

ObservationsEfficient catch less than maximum sustainable catch

(exception is where MC = 0)

Efficient catch leads to larger population level than maximum sustainable catch.

Application #1: Technology change

Read “The Fish Crisis”

Impact of better fishing technology?

Drives down the cost of fishing.

Impact on level of catch?

Impact on population?

Cost-reducing technology effort increases, catch rises, population falls

Fishing effort (E)

Cat

ch (

C)

E*

C*

TR

TC

E**

C**

Application #2: open access

What does “open access” mean?

Fishery open to all who “can afford to fish”

Someone can afford to fish as long as TR equals or exceeds TC

Maximum total effort is where TC = TR

Economic rent (profit) dissipated at this point

This level of effort is greater than efficient level where MC = MR

(Relate “Fishy Economics” to the graph)

Open access As long as TR>TC, new fishermen enter fishery…Result: effort increases, catch falls, population falls

Cat

ch (

C)

TC

Fishing effort (E)

E*

C*

TR

TR =TC

E**

C**