Random Penalties and Renewable Resources- A Mechanism to Reach Optimal Landings in Fisheries

Description

Recent literature considers illegal landings a moral hazard problem that arises because individual catches are unobservable. The literature proposes incentive schemes to solve the information problem. However, most of the schemes proposed raise huge information requirements and budget-balance is not secured. In this paper, we suggest a random penalty mechanism, which reduces the information requirements and secures budget-balance. In the random penalty mechanism aggregate catches are measured through the stock size and natural growth function. If aggregate catches are below optimal catches each fisherman receives a subsidy. If aggregate catches are above optimal catches the mechanism works such that either the fisherman is randomly selected and pays a fine or the fisherman is not randomly selected and receives a subsidy. The fine and subsidy can be designed such that budget-balance is secured and provided risk aversion is sufficiently large and the fine is high enough, the random penalty mechanism will generate optimal individual landings.
Emneord: LIFE: Bio-Economic Model, Fisheries, Illegal Landings, Information Requirement, Optimal Exploitation, Random Penalties, Regulatory Mechanisms

Period	10 Jul 2007
Event title	XVIII Annual Conference of the European Association of Fisheries Economists
Event type	Conference
Conference number	18.
Organiser	Central Bank
Location	Reykjavik, IcelandShow on map