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Ex-vessel Pricing and IFQs: A Strategic Approach

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  • Fell, Harrison

    (Resources for the Future)

Abstract

In this paper, intraseasonal fishing is modeled as a differential game between fishermen in a total allowable catch–regulated fishery with and without individual fishing quotas (IFQs). Heterogeneous harvest values are included by incorporating time-specific harvest costs and a stock effect into fishermen’s profit functions. I also allow for strategic interaction among fishermen via ex-vessel price dynamics. The equilibrium harvest strategies of the differential games are solved numerically through the use of a genetic algorithm. I demonstrate how different harvesting sector environments lead to varying degrees of ex-vessel price increases when IFQs are implemented. The primary result shows that possible margins for competition among fishermen, beyond competition for a greater share of the total allowable catch, can still exist under IFQ management and may be substantial enough to be able to prevent sizeable rent transfers from the processing sector to the harvesting sector.

Suggested Citation

  • Fell, Harrison, 2008. "Ex-vessel Pricing and IFQs: A Strategic Approach," RFF Working Paper Series dp-08-01, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-08-01
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    File URL: http://www.rff.org/RFF/documents/RFF-DP-08-01.pdf
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    References listed on IDEAS

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    1. Fershtman, Chaim & Kamien, Morton I, 1990. "Turnpike Properties in a Finite-Horizon Differential Game: Dynamic Duopoly with Sticky Prices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(1), pages 49-60, February.
    2. Homans, Frances R. & Wilen, James E., 1997. "A Model of Regulated Open Access Resource Use," Journal of Environmental Economics and Management, Elsevier, vol. 32(1), pages 1-21, January.
    3. Alemdar, Nedim M. & Sirakaya, Sibel, 2003. "On-line computation of Stackelberg equilibria with synchronous parallel genetic algorithms," Journal of Economic Dynamics and Control, Elsevier, vol. 27(8), pages 1503-1515, June.
    4. Costello, Christopher J & Deacon, Robert T, 2007. "The Efficiency Gains from Fully Delineating Rights in an ITQ Fishery," University of California at Santa Barbara, Economics Working Paper Series qt56n8x9qb, Department of Economics, UC Santa Barbara.
    5. Mercenier, Jean & Michel, Philippe, 1994. "Discrete-Time Finite Horizon Appromixation of Infinite Horizon Optimization Problems with Steady-State Invariance," Econometrica, Econometric Society, vol. 62(3), pages 635-656, May.
    6. Homans, Frances R. & Wilen, James E., 2005. "Markets and rent dissipation in regulated open access fisheries," Journal of Environmental Economics and Management, Elsevier, vol. 49(2), pages 381-404, March.
    7. Fershtman, Chaim & Kamien, Morton I, 1987. "Dynamic Duopolistic Competition with Sticky Prices," Econometrica, Econometric Society, vol. 55(5), pages 1151-1164, September.
    8. Alemdar, Nedim M. & Ozyildirim, Suheyla, 1998. "A genetic game of trade, growth and externalities," Journal of Economic Dynamics and Control, Elsevier, vol. 22(6), pages 811-832, June.
    9. Scott C. Matulich & Murat Sever, 1999. "Reconsidering the Initial Allocation of ITQs: The Search for a Pareto-Safe Allocation between Fishing and Processing Sectors," Land Economics, University of Wisconsin Press, vol. 75(2), pages 203-219.
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    Cited by:

    1. Matthew N. Reimer & Joshua K. Abbott & James E. Wilen, 2014. "Unraveling the Multiple Margins of Rent Generation from Individual Transferable Quotas," Land Economics, University of Wisconsin Press, vol. 90(3), pages 538-559.

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    More about this item

    Keywords

    individual fishing quotas; property rights; differential games; genetic algorithm;
    All these keywords.

    JEL classification:

    • Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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