Conference Proceedings Or Journal
 

Solving Real Options Models of Fisheries Investment When Salvage Value Is Difficult to Estimate

Public Deposited

Downloadable Content

Download PDF
https://ir.library.oregonstate.edu/concern/conference_proceedings_or_journals/f4752h776

Descriptions

Attribute NameValues
Creator
Abstract
  • Real options models arguably provide a useful framework for understanding individual fishermen's investment decisions, which play an important role in fisheries management issues ranging from capacity reduction to stock assessment. While these models appear to predict actual behavior reasonably well, one important difficulty in applying them is that the salvage value of the fishing enterprise (or the opportunity cost of fishing, which when capitalized can be treated as a salvage value) is often difficult to assess. For example, there may be few sales in a market for boats or licenses, and there may be little information on other employment opportunities available to fishermen. This paper adopts a fisherman's exit decision as a framework for exploring solution techniques for real options models when salvage value is difficult to estimate. We first present a simple model of the exit decision as a disinvestment problem, and then describe this model's solution by minimization and finite difference methods, including an iterative nonlinear least squares approach that allows rapid solution for a wide range of putative deterministic salvage values. We then allow salvage value to follow its own stochastic process, again exploring this example with both minimization and finite difference techniques. Our general conclusion is that minimization methods are much preferable when they apply, but that in most fisheries applications it will be necessary to resort to finite difference, finite element, or Monte Carlo methods.
  • Keywords: entry and exit, fisheries investment, Fisheries Economics, real options, numerical solution, Theoretical and Empirical Bio-Economic Analysis
Resource Type
Date Available
Date Issued
Citation
  • Tomberlin, David, Valentina Bosetti. 2004. Solving Real Options Models of Fisheries Investment When Salvage Value Is Difficult to Estimate. Peer Review: No. In: Proceedings of the Twelfth Biennial Conference of the International Institute of Fisheries Economics & Trade, July 20-30, 2004, Tokyo, Japan: What are Responsible Fisheries? Compiled by Ann L. Shriver. International Institute of Fisheries Economics & Trade, Corvallis, Oregon, USA, 2004. CD ROM. ISBN 0-9763432-0-7
Conference Name
Subject
Rights Statement
Publisher
Peer Reviewed
Language
Replaces

Relationships

Parents:

This work has no parents.

In Collection:

Items

Thumbnail Title Date Uploaded Visibility Actions
file details 194.pdf 2017-07-17 Public Download