Abstract:
The valuation of the opportunity to either invest or
exploit a fishery is particularly difficult because of
the high uncertainty concerning the resource price.
The traditional net-present-value (NPV) and other
discounted-cash-flows (DCF) methods cannot properly
capture the management's flexibility and strategic
value aspects of a fishery, thus they may understate
its value. The rationale for using an option-based approach
to capital budgeting arises from its potential
to conceptualize and quantify this flexibility, as new
information arrives, to alter its operating strategy, to
defer investments, to shut down (and restart) fishery
development. Real Options valuation has traditionally
been applied in the area of natural resource investments
different from fishing resources. This paper
presents a general bioeconomic model for the value of
a fishery. It suffices to determine not only the value
of the fishery when open and closed, but also the optimal
policy for opening, closing and setting the harvest
rate. Moreover, the paper turns to the valuation
of a fishery investment opportunity and the optimal
investment rule. The natural growth rate of fishing
resource stock and the production function are those
of the Schaefer model. Finally, results for the Pacific
Yellowfin ~l~na are presented.
