Does the optimal size of a fish stock increase with environmental uncertainties?
AbstractWe analyze the effect of environmental uncertainties on optimal fishery management in a bio-economic fishery model. Unlike most of the literature on resource economics, but in line with ecological models, we allow the different biological processes of survival and recruitment to be affected differently by environmental uncertainties. We show that the overall effect of uncertainty on the optimal size of a fish stock is ambiguous, depending on the prudence of the value function. For the case of a risk-neutral fishery manager, the overall effect depends on the relative magnitude of two opposing effects, the 'convex-cost effect' and the 'gambling effect'. We apply the analysis to the Baltic cod and the North Sea herring fisheries, concluding that for risk neutral agents the net effect of environmental uncertainties on the optimal size of these fish stocks is negative, albeit small in absolute value. Under risk aversion, the effect on optimal stock size is positive for sufficiently high coefficients of constant relative risk aversion. --
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Bibliographic InfoPaper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2012-09.
Date of creation: 2012
Date of revision:
fishery economics; environmental uncertainty; constant escapement; risk aversion; prudence;
Other versions of this item:
- Ute Kapaun & Martin Quaas, 2013. "Does the Optimal Size of a Fish Stock Increase with Environmental Uncertainties?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 54(2), pages 293-310, February.
- Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery
- Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-20 (All new papers)
- NEP-ENV-2012-10-20 (Environmental Economics)
- NEP-UPT-2012-10-20 (Utility Models & Prospect Theory)
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