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Vessel buybacks in fisheries: The role of auction and financing structures

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  • Graff Zivin, Joshua
  • Mullins, Jamie

Abstract

Vessel buyback programs intended to address overcapacity and excess capitalization in fisheries can lead to dramatically different levels of decapitalization depending on program structure and availability of vessel-specific information. This paper develops a simple theoretical model of self-financing vessel buybacks to examine equilibrium outcomes using sequential versus take-it-or-leave-it auctions, and financing schemes which allocate costs either homogeneously or according to rents captured through the buyback. This model demonstrates that programs which spread costs evenly among remaining vessels limit the possible extent of buybacks, as do programs which buy vessels one at a time in sequence rather than all at once. In addition to the theoretical modeling, a stylized case study inspired by the Inter-American Tropical Tuna Fishery is also provided. This analysis suggests that a wide range of auction structures could roughly half the size of the existing fleet, and starkly demonstrates how information poor settings can entirely derail a buyback.

Suggested Citation

  • Graff Zivin, Joshua & Mullins, Jamie, 2015. "Vessel buybacks in fisheries: The role of auction and financing structures," Marine Policy, Elsevier, vol. 53(C), pages 188-197.
    • Handle: RePEc:eee:marpol:v:53:y:2015:i:c:p:188-197
    DOI: 10.1016/j.marpol.2014.10.004
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    References listed on IDEAS

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    1. Clark, Colin W. & Munro, Gordon R. & Sumaila, Ussif Rashid, 2005. "Subsidies, buybacks, and sustainable fisheries," Journal of Environmental Economics and Management, Elsevier, vol. 50(1), pages 47-58, July.
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    6. H. Scott Gordon, 1954. "The Economic Theory of a Common-Property Resource: The Fishery," Palgrave Macmillan Books, in: Chennat Gopalakrishnan (ed.), Classic Papers in Natural Resource Economics, chapter 9, pages 178-203, Palgrave Macmillan.
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    9. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
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    12. Anthony Scott, 1955. "The Fishery: The Objectives of Sole Ownership," Journal of Political Economy, University of Chicago Press, vol. 63, pages 116-116.
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    Cited by:

    1. Barbara Hutniczak & Niels Vestergaard & Dale Squires, 2019. "Policy Change Anticipation in the Buyback Context," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(1), pages 111-132, May.

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    More about this item

    Keywords

    Fisheries policy; Common pool; Buyback programs; Self-financing; Capacity reduction; Decommissioning schemes;
    All these keywords.

    JEL classification:

    • Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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