Using a model of regulated open access resource use with markets, we illustrate the potential complexity of interactions between markets, product quality, excess effort, and regulatory behavior in fisheries. Our model assumes two product types, one of which is processed and storable. The model describes the equilibrium that results when effort responds to open access incentives and when regulators respond to effort growth by mitigating its potential harmful effects on biomass safety. We use numerical simulations to demonstrate a mechanism by which market growth leads to the diversion of raw inputs into the inherently inferior market. The result is a scenario in which rents are dissipated not only because excessive inputs raise costs, but also because inferior product types reduce revenues. We conclude with an illustrative decomposition of rent gains into revenue and cost savings gains from rationalizing a hypothetical fishery, demonstrating the potential significance of market-side rents.
Bibliographical noteFunding Information:
The genesis of this paper was originally presented at the 40th Anniversary Conference honoring the Norwegian School of Economics and Business’ Institute of Fisheries Economics in 1993. Since then, helpful comments by Jim Anderson, Frank Asche, Lee Anderson, Gardner Brown, Gordon Munro, Ragnar Tveteras, and Kjell Salvannes have improved the paper. Thanks also go to the Minnesota Agricultural Experiment station and the Giannini Foundation for funding support, and to the Associate Editor and anonymous reviewers for helpful comments.
Copyright 2008 Elsevier B.V., All rights reserved.
- Regulated open access
- Rent dissipation