Optimal fisheries management and the response to price changes

The literature on how price changes affect optimally managed fisheries is mostly concerned with how fish stocks and harvest rates are affected in steady state. There is little published on how prices affect optimal harvest rates at stock levels outside of steady state. Here we show the effect of an unanticipated and permanent price increase. It is shown that in a model of a pure schooling fishery, if the stock is below the steady state, it is optimal to harvest less if the price goes up and vice versa. It is also shown that in a model with stock dependent harvest costs, the optimal response to a price increase is to reduce the harvest rate for low stock levels even if the optimal harvest rate increases close to the steady state. Empirical relevance is demonstrated by illustrating the theoretical results in an estimated model. • The paper analyses the canonical fisheries model and how optimal harvest levels should respond to changes in prices. • For sufficiently low stock levels it is optimal to reduce harvests in response to a price increase. • Results underscore that changes in parameters may result in changes out side of steady state that are opposite of the changes in steady state.