Discussion Papers, Department of Finance and Management Science, Norwegian School of Economics (NHH)
Analyzing Risk of Stock Collapse in a Fishery under Stochastic Profit Maximization
(), Leif K. Sandal
() and Sturla F. Kvamsdal
Abstract: In commercial fisheries, stock collapse is an intrinsic
problem caused by overexploitation or due to pure stochasticity. To analyze
the risk of stock collapse, we apply a relatively simple Monte Carlo
approach which can capture complex stock dynamics. We use an economic model
with downward sloping demand and stock dependent costs. First, we derive an
optimal exploitation policy as a feedback control rule and analyze the
effects of stochasticity. We observe that the stochastic solution is more
conservative compared to the deterministic solution at low level of
stochasticity. For moderate level of stochasticity, a more myopic
exploitation is optimal at small stock and conservative at large stock
level. For relatively high stochasticity, one should be myopic in
exploitation. Then, we simulate the system forward in time with the optimal
solution. In simulated paths, some stock recovered while others collapsed.
From the simulation approach, we estimate the probability of stock collapse
and characterize the long term stable region.
Keywords: Stochasticity; Ensemble Kalman filter; Stock Collapse; Probability; (follow links to similar papers)
JEL-Codes: C61; Q22; Q57; (follow links to similar papers)
23 pages, April 27, 2012
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