Transcript AGEC/FNR 406 LECTURE 27 Fisheries, Part II Static-efficient sustained yield Gordon model (simplest approach) Goal: determine a catch level that provides the largest net benefit Solution:

AGEC/FNR 406
LECTURE 27
Fisheries, Part II
Static-efficient sustained yield
Gordon model (simplest approach)
Goal: determine a catch level that provides
the largest net benefit
Solution: find output level where marginal
cost and marginal benefit are equal (i.e.
where the distance between total revenue
and total cost is at a maximum)
Assumptions, part 1:
Benefits:
Benefit determined by total revenue: TR = P * Q
P = Price
Market price reflects value to society
Price per unit of catch is constant
(fishery represents small portion of the overall
market)
Q = Quantity
Catch per unit of fishing effort is proportional
to population
Assumptions, part 2:
Costs:
Cost determined by total cost: TC = FC + VC
(But here we ignore fixed cost (FC) which is
a “sunk” cost)
Variable cost (VC) determined by “fishing
effort” VC = labor + equipment + fuel +
depreciation, etc. Total cost proportional to
effort.
For given amount of effort, yield (Y) is
proportional to population (X)
Four steps required:
1. Map the effort-catch relationship
2. Convert sustainable yield function to effortbased relationship
3. Create total revenue (benefit) function by
multiplying catch*price
4. Combine total revenue and total cost to find
optimal level of effort (MB=MC)
Step 1: map pop & effort into catch
Start with yield-effort relationship
Catch (C)
(Kahn, Figure 10.6)
E3 > E2 > E1
YE3
Catch rises with
effort and pop.
YE2
YE1
Fish population (X)
Step 2: effort and sustainable yield
Catch (C)
As effort increases…catch rises then falls.
Why? Higher catch reduces pop growth.
C2
C3
C1
E1
E2
E3
Fishing effort (E)
Compare with Logistic Growth Function
Growth of population (G)
(Kahn, figure 10.1)
G2
Same shape, but
x-axis is reversed
G1
X1
K
X2
Fish population (X) increasing 
Effort (E) increasing
Step 3: compute total revenue
Catch (C)
Total Revenue = Catch x Price
C2
C3
TR
C1
E1
E2
E3
Fishing effort (E)
Step 4: add total cost to find E*
Total Revenue = Catch x Price
Catch (C)
TC
C*
}
TR-TC
E*
Fishing effort (E)
TR
Summary of static-efficient sustained
yield model
Efficient catch occurs where MC = MR
MC is slope of cost curve
MR is slope of revenue curve
Observations
Efficient catch less than maximum sustainable catch
(exception is where MC = 0)
Efficient catch leads to larger population level than
maximum sustainable catch.
Application #1: Technology change
Read “The Fish Crisis”
Impact of better fishing technology?
Drives down the cost of fishing.
Impact on level of catch?
Impact on population?
Cost-reducing technology
effort increases, catch rises, population falls
Catch (C)
TC
C**
C*
TR
E* E**
Fishing effort (E)
Application #2: open access
What does “open access” mean?
Fishery open to all who “can afford to fish”
Someone can afford to fish as long as TR equals
or exceeds TC
Maximum total effort is where TC = TR
Economic rent (profit) dissipated at this point
This level of effort is greater than efficient level
where MC = MR
(Relate “Fishy Economics” to the graph)
Open access
As long as TR>TC, new fishermen enter fishery…
Result: effort increases, catch falls, population falls
TR =TC
Catch (C)
TC
C*
C**
TR
E*
Fishing effort (E)
E**