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More Landings for Higher Profit? Inverse Demand Analysis of the Bluefin Tuna Auction Price in Japan and Economic Incentives in Global Bluefin Tuna Fisheries Management

Author

Listed:
  • Chin-Hwa Jenny Sun

    () (National Taiwan Ocean University)

  • Fu-Sung Chiang

    (National Taiwan Ocean University)

  • Dale Squires

    (Dept of Economics, University of California San Diego)

  • Anthony Rogers

    (California Ocean Science Trust, Oakland, CA, USA)

  • Man-Ser Jan

    (National Taiwan Ocean University)

Abstract

This paper estimates the price changes in bluefin tuna markets in response to shifts in regional and global landings to evaluate the conservation incentives from changes in the Total Allowable Catch (TAC). Overall supply management that impacts regional and global industry revenues through the Regional Fisheries Management Organizations creates a potential economic incentive. A fisherman¡¦s income, and thus the financial incentive to accept management measures controlling catch levels, depends in part on how responsive price is to overall catch. When price falls proportionately more than landings increase, the total revenue of the industry falls. Fishermen, with their own best interest in mind, will continue increasing their own landings and create an incentive to increase the TAC within the industry, without realizing the possibility of revenue loss due to the resulting falling prices. To protect the value of all stakeholders¡¦ property rights, a consensus to avoid abruptly raising the TAC, without first considering the potential loss due to market response, is needed. Alternatively, if revenue increases with lower TAC, a positive economic incentive for conservation is created through price increasing proportionately more than the lower supply, with harvest profits boosted by lower costs of production. To capture the complexity of substituting across various sources of supply and product form, a general synthetic inverse demand system is estimated to identify the impact of overall landings on bluefin tuna (BFT) prices. This system estimates price flexibilities of both fresh and frozen longline-caught sashimi-grade tunas (Pacific and Atlantic bluefin, southern bluefin, and bigeye) at the Tsukiji Market in Tokyo, the world¡¦s largest fish auction market that serves as the single global price leader for bluefin tunas. The resulting estimation shows that own-quantity price flexibilities of every type of fresh and frozen BFTs are less than unity and inflexible in their own consumption. This creates poor individual producer incentives for fishermen to voluntarily reduce wild or farmed BFT supply, as there is (in theory) still a chance to increase their own revenue, under the unlikely condition that there is a fixed total supply with no substitution effect across other tuna products. However, the study shows that these sashimi-grade tunas are highly substitutable to each other and the estimated fresh and frozen BFTs scale flexibilities are all close to one in absolute value. If the scale flexibility is greater than one, suppliers will not be better off by increasing total supply, as price will drop proportionally faster and total revenue will thus be lower. We utilize the rapid increases in the TAC of Eastern Atlantic bluefin tuna (EABFT) in recent years to explore these results. Based on the estimated scale flexibility of frozen BFT (0.911), which is slightly less than unity, the frozen subsector of EABFT suppliers is the only winner in light of the supply increases. Suppliers of frozen BFT in other regions, suppliers of fresh BFT (in the Atlantic and elsewhere), and suppliers of southern BFT and bigeye tuna will all be harmed through lower revenue by the supply increases. However, even individual suppliers of frozen EABFT may not necessarily see revenue increases, because of the absence of any sort of property right system in the region that would otherwise guarantee a proportion of the increased catch. Additionally, while total revenue might stay the same for frozen BFT suppliers, fishermen will potentially receive lower profits due to higher operating costs associated with increased landings when the supply of EABFT increases. Given the number of sectors that ultimately lose financially in the short term, and given the ecological (and production) risks accompanying an abrupt increase in fishing pressure in the long term, the global economic losses resulting from an increase in the allowable catch of Atlantic bluefin tuna will outweigh any potential increases to revenue.

Suggested Citation

  • Chin-Hwa Jenny Sun & Fu-Sung Chiang & Dale Squires & Anthony Rogers & Man-Ser Jan, 2018. "More Landings for Higher Profit? Inverse Demand Analysis of the Bluefin Tuna Auction Price in Japan and Economic Incentives in Global Bluefin Tuna Fisheries Management," Working Papers 1901, Institute of Applied Economics, National Taiwan Ocean University, Taiwan, revised Jan 2019.
  • Handle: RePEc:nto:wpaper:1901
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    conservation incentives; general synthetic inverse demand systems; own-quantity flexibility; scale flexibility; sashimi-grade tuna market;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices

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