Uncertainty in Fisheries Economics: The Role of the Discount Rate
AbstractStandard models of management of a single-species fishery generally assume that the biomass is of known size and that it is generated by a well-specified deterministic growth law. In reality the biomass is of uncertain size and usually subject to random growth. Several authors have addressed the problem of random growth assuming a known initial biomass and have shown that lowering the planning discount rate proportional to the variance is an optimal planning procedure assuming small perturbations. In this paper we assume that the growth function is nonrandom but dependent upon a biomass stock of unknown size. We shall show that a planner should raise the discount rate relative to the certainty equivalent case by an amount related to society's distaste for risk in order to manage the biomass optimally over time. As is to be expected, the optimal steady-state biomass will be less than would occur in a situation of certainty.
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Bibliographic InfoArticle provided by Marine Resources Foundation in its journal Marine Resource Economics.
Volume (Year): 01 (1984)
Issue (Month): 2 ()
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Web page: http://www.uri.edu/cels/enre/mre/mre.htm
Environmental Economics and Policy; International Development; Resource /Energy Economics and Policy; Risk and Uncertainty;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Barry Smith, J., 1980. "Replenishable resource management under uncertainty: A reexamination of the U.S. Northern Fishery," Journal of Environmental Economics and Management, Elsevier, vol. 7(3), pages 209-219, September.
- Rowse, John, 2004. "Using The Wrong Discount Rate To Allocate A Marine Resource," Marine Resource Economics, Marine Resources Foundation, vol. 19(2).
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