This document provides an introduction to basic bioeconomic analysis and game theoretic applications for studying shared fish stocks. It summarizes a basic bioeconomic model of fishing that involves both the natural and human components of a fishery. Overfishing, overcapacity, and low or negative profits are classical management problems that can be predicted using bioeconomic models that consider both catch per unit effort and fishing mortality over time. The document outlines a Gordon-Schaefer bioeconomic model and describes how open access can lead to overfishing and zero economic rents. It also discusses potential solutions to these issues such as total allowable catches, limited entry, and individualized quotas.

1. 1
Basic Bioeconomics Model of Fishing

2. 2
Objectives of lecture
• Introduce you to basic bioeconomic
analysis;
• Introduce you to game theoretic
applications to the study of shared fish
stocks.

3. 3
The Fishery
Natural
Component
Human
Component

4. 4
• Catch per unit of fishing effort (CPUE) is
the total catch divided by the total amount
of effort used to harvest the catch.
• CPUE = c/E
Catch per unit effort

5. Global catch and effort
*Effective effort indexed on 2000 based on average 2.42% increase annually
Effort(GWorwattsx109
)
Catch(milliontonnes)
Year
5
10
15
20
25
10
20
30
40
50
60
70
80
90
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Catch
FAO Fisheries Statistics

6. Global catch and effort
*Effective effort indexed on 2000 based on average 2.42% increase annually
Effort(GWorwattsx109
)
Catch(milliontonnes)
Year
5
10
15
20
25
10
20
30
40
50
60
70
80
90
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Catch
Effective effort*
Watson et al. (2012)

7. Classical Management Problems
• Overfishing;
• Overcapacity;
• Low or negative profits.
• Can you predict the above using only cpue and/or
fishing mortality models? Nope!
• Bioeconomic models needed to predict these
results!

8. These undesirable outcomes are the
result of Individually Rational, but
Non-cooperative Behavior

9. 9
Issues in fisheries economics
• Fish as natural capital in a broad sense;
• Fish as common property resource;
• Externalities  Tragedy of the commons
  Private property;
• Need for regulation;
• Decision making over time.

10. 10
Fish as natural capital in a broad sense
• The natural environment contains the
natural resources essential to life on earth;
• Natural resources provide inputs to our
economic system;
• By and large economists see natural
resources as similar to human made capital.

11. 11
Economic efficiency
and
Bioeconomics

12. 12
Economic efficiency
• Maximum profit subject to sustainability;
• Profit = Total Revenue – Total Cost;
• With economic efficiency, profit is
maximized.

13. 13
A static single species model
• Fisheries biology – the logistic model;
• The optimal harvest – equilibrium catch;
• The maximum sustainable yield;
• Sustainable yield as a function of effort;
• Max Profit= max(TR-TC):=Maximum
Economic Yield;
• Profit=TR-TC=0:=Bionomic equilibrium.

14. The Basic Bioeconomic model
MEY
MSY
Bionomic
equilibrium
(BE)
Total cost of
fishing effort
(TC)
Total
Revenue
(TR)
Fishing effort (E)
TR
&
TC
( $)
E1 E2 E3
Max.
rent
Gordon Schaefer bioeconomic model

15. Bioeconomic Models
• (1) Biological Model:
Net annual change of biomass =
Growth + Recruitment – Nat. Mortality – Catch
(2) Economic Model:
Net annual revenue =
Sales income - Cost

16. R = pH – cE
Schaefer Catch Equation: H = qEx (Highly
Dubious!)
Therefore R = (pqx – c) E
Bionomic Equilibrium:
Under open access, fishery reduces the stock
level x until R = 0, i.e.,
x = c/pq
Predictions: Zero rents; overfishing ( if c/p low).

17. Numerical example:
Bo = 1,000,000 t
q = .001 / vessel yr
c = $ 500,000 / vessel yr
Price p ($/tonne) x (Bionomic Eq.)
500 1,000,000 t
1,000 500,000 t
5,000 100,000 t
What is Bionomic Equilibrium?

18. How to Fix It?
• TACs?
• Gear Regulations?
• Limited Entry?
• Vessel Buy-backs?
• Quasi-property rights through individualized (or
community) quotas;
• MPAs;
• Taxes.

19. Bioeconomic modeling
• The objective of fisheries management:
– Conservation of resources through time;
– Economic viability and profitability;
– Social objectives.

20. Economic rent/profit
• Total revenue = price*harvest (V).
• Total cost = unit cost of effort* effort (C).
• Economic rent = V – C.

21. Dynamic bioeconomic model
• Discounted economic
rent (V-C) through time
to obtain the discounted
value of the economic
benefits from the
fishery.
rateiscount
)1(
1
)(
0
d
dwhere
CVdNPV
T
t
tt
t
=
+
=
−= ∑=
δ
δ

22. 22
Decision making over time
• Natural resource (NR) use involves decision
making over time:
– How much oil or gold should be extracted from a mine
this year, how much next year, etc?
– Should salmon on the west coast of Canada be
harvested intensively this year or not at all?
• Time is important because the supply curve of
NRs are always shifting due to:
– Depletion of non-renewable resources and
– biological and physical changes in renewable resources.

23. 23
• Hence, a dynamic rather than a static
analysis is required to analyze natural
resource use in most cases;
• Interest or discount rates are a crucial link
between periods in dynamic models of NR
use;
• Discount rate vs. discount factor;
• Present value vs. current value.
– Introduce your quiz!

24. Thank for your attention