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The Valuation of Fisheries Rights: A Real Options Approach

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  • Jose Pizarro
  • Eduardo S. Schwartz

Abstract

This article develops and implements a Real Option approach to value renewable natural resources in the case of Marine Fisheries. The model includes two sources of uncertainty: the resource biomass and the price of fish, and it can be used by fisheries to optimally adapt their harvesting strategy to changing conditions in these stochastic variables. The model also features realistic operational cash flows and fisheries can shutdown and reopen operations. Using publicly available data on the British Columbia halibut fishery, the required parameters are estimated and the model solved. The results indicate that the conservation of the biomass is both optimal from a financial and a social perspective. The approach could be extended to other fish species and natural resources if the appropriate data were available.

Suggested Citation

  • Jose Pizarro & Eduardo S. Schwartz, 2018. "The Valuation of Fisheries Rights: A Real Options Approach," NBER Working Papers 25140, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:25140
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    References listed on IDEAS

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    3. Burkhard Heer & Alfred Maußner, 2024. "Dynamic General Equilibrium Modeling," Springer Texts in Business and Economics, Springer, edition 3, number 978-3-031-51681-8, August.
    4. Colin W. Clark & Gordon R. Munro, 2017. "Capital Theory and the Economics of Fisheries: Implications for Policy," Marine Resource Economics, University of Chicago Press, vol. 32(2), pages 123-142.
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    8. Robert S. Pindyck, 1984. "Uncertainty in the Theory of Renewable Resource Markets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(2), pages 289-303.
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    Cited by:

    1. Neha Deopa & Daniele Rinaldo, 2020. "Quickest Detection of Ecological Regimes for Natural Resource Management," Papers 2005.11500, arXiv.org, revised Mar 2024.
    2. Coralie KERSULEC & Luc DOYEN, 2022. "From fork to fish: The role of consumer preferences on the sustainability of fisheries," Bordeaux Economics Working Papers 2022-10, Bordeaux School of Economics (BSE).

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    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery

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