Valuation and Management of Fishing Resources Under Price Uncertainty |
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Authors: | Arantza Murillas José Manuel Chamorro |
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Institution: | (1) Dpt. Economía Aplicada, Universidad de Vigo, Lagaos (Marcosende) s/n, 36200 Vigo, Spain;(2) Fundación AZTI, Sukarrieta (Bizkaia), Spain;(3) Dpt. Fundamentos del Análisis Económico I and Instituto de Economía Pública, University of the Basque Country, Avda. Lehendakari Aguirre, 83, 48015 Bilbao (Bizkaia), Spain |
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Abstract: | The traditional expected-net-present-value methods cannot properly capture the management flexibility and strategic value
aspects of a fishery, and may understate its value. Instead, this paper develops a Real Options model to conceptualize and
evaluate fishery exploitation flexibility. Specifically, general models to value the opportunity to either exploit or invest
in a fishery are presented. They suffice to determine not only these values, but also the optimal policy for opening, closing,
delaying and setting its harvest rate. The sustainable case in which the harvest rate equals the natural net growth function
is also considered. Concerning the exploitation decision, it is found that, as could be expected, the higher the resource
price the higher the value of this opportunity in both models (general and sustainable). However, the resource stock affects
both models differently. As to the investment opportunity, its value is always lower than the exploitation opportunity because
of investment costs. Finally, numerical simulations are run in order to illustrate the nature of the solution. Sensitivity
analysis concerning the influence of the tax rate, convenience yield, risk-free interest rate and price volatility on the
value of the fishery is also reported.
Earlier versions of this paper have benefited from conference participants at the Young Economists Conference 2000 (Oxford
University), Tenth Biennial Conference of the International Institute of Fisheries Economics and Trade (Oregon State University),
XXV Simposio de Análisis Económico (Universidad Autónoma de Barcelona, Spain) and Seminar at the Dpt. Fundamentos del Análisis
Económico (Universidad del País Vasco, Spain). We especially thank Prof. Ian Bateman and two anonymous referees whose insightful
comments have enabled us to eliminate several errors and to improve the presentation. Murillas gratefully acknowledges doctoral
fellowship from Ministerio de Educación y Ciencia (AP96), and financial support from the Xunta de Galicia (PGIDT01PXI30004PR)
and from the Ministerio de Ciencia y Teconología (SEC 2001-3700). The usual disclaimer applies. |
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Keywords: | bioeconomic model fishing resources management flexibility Real Options |
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