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Using Real Options to Estimate a Benefit of The Adaptive Resource Management

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  • In the institutional framework of fishery management in Japan, which can be seen as a Co-Management system, fishermen's agreements are prerequisites for implementation of resource management measures. However, because of uncertainties in the effect of management measures, fishermen's agreements are difficult to obtain. This study applied a decision-making method under uncertainty, i.e., Real Options Analysis, to the implementation process occurring in Kyoto, which is known as a successful example of Japanese co-management. There are two management measures in place here; voluntary restraint of fishery operations (reversible), and shelter constructions by public expenditure (irreversible). In both cases, a small-scale trial was implemented before full expansion. Based upon information from daily fishery operations during the trial period, expansion of each measure was agreed upon by local fishermen. This implementation process can be seen as an Adaptive Management Strategy, and can be modeled as a Compound Rainbow Option. The optimal decision-making strategy is derived, where not only short-term benefits for fishermen, but also long-term profits for the administration are taken into account. In addition, the benefits of this adaptive strategy compared to a hypothetical, non-flexible (top down) policy are estimated. In this model, fishermen participate independently in the decision making process, which reflects the actual institutional features of the Japanese co-management system.
  • Keywords: Fisheries Economics, Institutional Features, Japan, Asian Fisheries and Aquaculture, adaptive management, Co-management, Real Options
  • Keywords: Fisheries Economics, Institutional Features, Japan, Asian Fisheries and Aquaculture, adaptive management, Co-management, Real Options
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  • Makino, Mitsutaku. 2004. Using Real Options to Estimate a Benefit of The Adaptive Resource Management. 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
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