Monday, October 09, 2006

Playing Chicken with Salmon

This paper deserves to be highlighted for no other reason than the excellent title.

However, the decline in the fish stocks across the world is important and the management of renewable resources is of course a key part of any Environmental Economics course.

Even today's Times has a short piece on the environmental audit by the New Economics Foundation to say that today marks the date when the world is living beyond its environmental limit. The full article is here.

The fish reference is fairly predictable:
This has been called, ‘the biggest issue you’ve never heard of,’ yet its causes and effects are simple and logical. If we eat more than we grow in any given year, we have to dip into reserves. If we cut trees faster than they grow back, then our forests become smaller than the year before. If we catch more fish than spawn each year, then there will be fewer fish in the sea.

We will no doubt write more on the ecological footprint issue in future posts as we are beginning to do a little work in this area.

Back to the Chicken and Salmon - the conclusions and all fairly intuitive.
Playing Chicken with Salmon
Date: 2006-08-29
By: Jon Olaf Olaussen (Department of Economics, Norwegian University of Science and Technology)


Wild Atlantic salmon are traditionally harvested from both the sea and spawning rivers during spawning runs. From an economic point of view, the return from sport fishing in rivers is several times higher than marine ‘for meat only’ harvests. This situation calls for a side payment regime where river owners pay marine fishermen not to fish, and where both parties gain. This paper argues that the reason why such side payment regimes are rarely seen, despite the obvious mutual gain, is due to the potential free-riding incentives among river owners. Although it is shown that the decision each river owner faces can be described as a game of chicken, taking the stochastic ecology into account may reveal a different pay-off structure. It is also demonstrated that the stochastic ecology of salmon, combined with price rigidities in the rivers, may explain the lack of side payment regimes.

Keywords: Atlantic salmon; game of chicken; recreational versus commercial fishing; side payment; stochastic ecology
JEL: Q22 Q26 D81

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