Scandinavian Working Papers in Economics

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2009/6: Continuous harvesting costs in sole-owner fisheries with increasing marginal returns

Jose M. Maroto (), Manuel Moran (), Leif K. Sandal () and Stein I. Steinshamn ()
Additional contact information
Jose M. Maroto: Department of Estadística e Investigación Operativa II, Universidad Complutense, Postal: Universidad Complutense, Department of Estadística e Investigación Operativa II, 28223 Madrid, Spain
Manuel Moran: Department of Fundamentos del Análisis Económico I, Universidad Complutense, Postal: Universidad Complutense, Department of Fundamentos del Análisis Económico I, 28223 Madrid, Spain
Leif K. Sandal: Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Finance and Management Science, Helleveien 30, N-5045 Bergen, Norway
Stein I. Steinshamn: Institute for Reasearch in Economics and Business Administration, Postal: Institute for Reasearch in Economics and Business Administration, Breiviksveien 40, , N-5045 Bergen, Norway

Abstract: We develop a bioeconomic model to analyze a sole-owner fishery with fixed costs as well as a continuous cost function for the generalized Cobb-Douglas production function with increasing marginal returns to effort level. On the basis of data from the North Sea herring fishery, we analyze the consequences of the combined effects of increasing marginal returns and fixed costs. We find that regardless of the magnitude of the fixed costs, cyclical policies can be optimal instead of the optimal steady state equilibrium advocated in much of the existing literature. We also show that the risk of stock collapse increases significantly with increasing fixed costs as this implies higher period cycles which is a quite counterintuitive result as higher costs usually are considered to have a conservative effect on resources.

Keywords: Bioeconomic modelling; Stock collapse; Fixed costs; Pulse fishing; Cyclical dynamics; Increasing marginal returns

JEL-codes: Q57

36 pages, September 15, 2009

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