Excess Capacity and Capital Malleability in a Fishery with Myopic Expectations

Abstract

A B S T R A C TUnderstanding the process whereby fishing capital accumulates and excess capacity emerges, particularly in fisheries where incentives for race to fish and race to invest are present, and where capital is not perfectly malleable, remains an important topic. We develop a dynamic model, incorporating quasi-malleable capital, race to fish and invest behaviors and myopic expectations, in which the level of excess capacity is endogenously determined. We show the importance of capital malleability, and of other biological and economic conditions, in determining the existence and strength of persistent equilibrium excess capacity in the fishery. We also highlight a link between the state of the fishery at the time race behavior emerges and the resultant level of excess capacity. Our results have implications for both the management of excess capacity and the use of empirical measures of excess capacity as performance indicators in fisheries where race behaviors are present.

Overcapacity and dynamics of a tuna fleet facing catch limits and high efficiency: The case of the Indian Ocean tuna fishery

“…In 1997, three vessels exited, and one entered, thus improving both TE and CU efficiencies. This latter sequence demonstrates that the relationship between efficiency and entry/exit strategies is dual: lower fishing opportunities induced by catch limits increase inefficiency and trigger exit strategy for vessels, but the lower capacity resulting from exit decisions upgrades mechanically TE and CU (Felthoven 2002, Rust et al 2016.…”

“…According to Hilborn et al (2020), excess fishing pressure results in about a 3-5% loss in potential yields from 50% of the world's potential catch, leading to overfishing in many fish stocks (FAO 2018). A highly efficient fleet facing catch limits (i.e., quotas) may also result in endogenous overcapacity, representing an economic waste of financing resources that could be invested more usefully in other fisheries or other sectors (Rust et al 2016). Technical efficiency comes from the optimal use of inputs to produce a given quantity of output moving along the production frontier (the maximum level that can be produced using the available inputs), while technical change corresponds to a shift of the production frontier itself (higher output level with the same amount of inputs).…”

Overcapitalization and social norms of cooperation in a small-scale fishery

“…Malleability of capital, reversibility of investments (Rust et al, 2016;Clark et al, 1979) (Clark, 1990, P.110), (Allison and Ellis, 2001) 3.1 3.2 Dynamic between effort and capital (Nøstbakken et al, 2011;Clark, 1990)…”

“…non-reversible investments (cf. Rust et al (2016); McKelvey (1985)), which is more realistic, but challenging, if not impossible to combine with a model of social norms. After all, there is strategic interaction, so that agents would have to from beliefs about investment of peers (potentially guided by norms) and the development of the stock.…”