agec/fnr 406 lecture 27 fisheries, part ii. static-efficient sustained yield gordon model (simplest...
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AGEC/FNR 406 LECTURE 27
Fisheries, Part II
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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)
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Assumptions, part 1:
Benefits:Benefit determined by total revenue: TR = P * QP = Price
Market price reflects value to societyPrice per unit of catch is constant
(fishery represents small portion of the overall market)
Q = QuantityCatch per unit of fishing effort is proportional
to population
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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)
Assumptions, part 2:
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1. Map the effort-catch relationship
2. Convert sustainable yield function to effort-based 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)
Four steps required:
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Start with yield-effort relationship(Kahn, Figure 10.6)
Fish population (X)
Cat
ch (
C) YE3
YE1
YE2
E3 > E2 > E1
Catch rises with
effort and pop.
Step 1: map pop & effort into catch
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Step 2: effort and sustainable yield
E2
C2
Fishing effort (E)
Cat
ch (
C)
C1
E1 E3
C3
As effort increases…catch rises then falls.Why? Higher catch reduces pop growth.
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Compare with Logistic Growth Function(Kahn, figure 10.1)
Same shape, but x-axis is reversed
KX2
G2
Fish population (X) increasing
Gro
wth
of
popu
lati
on (
G)
G1
X1
Effort (E) increasing
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Step 3: compute total revenue
Total Revenue = Catch x Price
Fishing effort (E)
Cat
ch (
C)
E2
C2
C1
E1 E3
C3
TR
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Step 4: add total cost to find E*
Total Revenue = Catch x Price
Cat
ch (
C)
TC
Fishing effort (E)
E*
C*
TR}TR-TC
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Summary of static-efficient sustained yield model
Efficient catch occurs where MC = MRMC is slope of cost curve
MR is slope of revenue curve
ObservationsEfficient catch less than maximum sustainable catch
(exception is where MC = 0)
Efficient catch leads to larger population level than maximum sustainable catch.
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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?
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Cost-reducing technology effort increases, catch rises, population falls
Fishing effort (E)
Cat
ch (
C)
E*
C*
TR
TC
E**
C**
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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)
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Open access As long as TR>TC, new fishermen enter fishery…Result: effort increases, catch falls, population falls
Cat
ch (
C)
TC
Fishing effort (E)
E*
C*
TR
TR =TC
E**
C**