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Valuation and Management of Fishing Resources Under Price Uncertainty


  • Arantza Murillas
  • José Manuel Chamorro



The traditional expected-net-present-value methods cannot properly capture the management flexibility and strategic value aspects of a fishery, and may understate its value. Instead, this paper develops a Real Options model to conceptualize and evaluate fishery exploitation flexibility. Specifically, general models to value the opportunity to either exploit or invest in a fishery are presented. They suffice to determine not only these values, but also the optimal policy for opening, closing, delaying and setting its harvest rate. The sustainable case in which the harvest rate equals the natural net growth function is also considered. Concerning the exploitation decision, it is found that, as could be expected, the higher the resource price the higher the value of this opportunity in both models (general and sustainable). However, the resource stock affects both models differently. As to the investment opportunity, its value is always lower than the exploitation opportunity because of investment costs. Finally, numerical simulations are run in order to illustrate the nature of the solution. Sensitivity analysis concerning the influence of the tax rate, convenience yield, risk-free interest rate and price volatility on the value of the fishery is also reported. Copyright Springer 2006

Suggested Citation

  • Arantza Murillas & José Manuel Chamorro, 2006. "Valuation and Management of Fishing Resources Under Price Uncertainty," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 33(1), pages 39-71, January.
  • Handle: RePEc:kap:enreec:v:33:y:2006:i:1:p:39-71
    DOI: 10.1007/s10640-005-0591-2

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    References listed on IDEAS

    1. Weninger, Quinn & Just, Richard E., 1997. "An Analysis of Transition From Limited Entry to Transferable Quota: Non-Marshallian Principles for Fisheries Management," Staff General Research Papers Archive 5225, Iowa State University, Department of Economics.
    2. Neher,Philip A., 1990. "Natural Resource Economics," Cambridge Books, Cambridge University Press, number 9780521311748, May.
    3. Anastasios Xepapadeas, 2001. "Irreversible Deveolpment of a Natural Resource: Management rules and policy issues when direct use values and environmental values are uncertain," Working Papers 0111, University of Crete, Department of Economics.
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    Cited by:

    1. Matteo Ferraris & Elena Pagliarino, 2014. "Real Option Theory and Application to the Fishery Industry: A survey of the literature," CERIS Working Paper 201408, Institute for Economic Research on Firms and Growth - Moncalieri (TO) ITALY -NOW- Research Institute on Sustainable Economic Growth - Moncalieri (TO) ITALY.
    2. Sarkar, Sudipto, 2009. "Optimal fishery harvesting rules under uncertainty," Resource and Energy Economics, Elsevier, vol. 31(4), pages 272-286, November.

    More about this item


    bioeconomic model; fishing resources; management flexibility; Real Options; G13; Q22;

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery


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