Suggested Bibliographic Reference: Challenging New Frontiers in the Global Seafood Sector: Proceedings of the Eighteenth Biennial Conference of the International Institute of Fisheries Economics and Trade, July 11-15, 2016. Compiled by Stefani J. Evers and Ann L. Shriver. International Institute of Fisheries Economics and Trade (IIFET), Corvallis, 2016.
Proceedings of the Eighteenth Biennial Conference of the International Institute of Fisheries Economics and Trade, held July 11-15, 2016 at Aberdeen Exhibition and Conference Center (AECC), Aberdeen, Scotland, UK.
In the present paper we study effect of information uncertainty on efficiency of multispecies fishery contracts, when private harvesting costs are uncertain. A static game between a principal and two fishing fleets is considered, when fishermen are completely selective about allocation of their harvesting efforts between the commercial and non-commercial fish species. It is assumed that the two fish stocks are antagonistic (i.e. high level of the non-commercial stock prevents growth of the commercial stock). Costs associated with harvesting non-commercial species is private information of each fisherman, and can be either high or low. In case of outgrowth of non-commercial species, the principal wishes to propose a contract to the fishermen to harvest non-commercial species as well as commercial, to recover the stock of the commercial species. Such contract regulates harvesting efforts for both species and specifies contract payments to the fishermen for harvesting non-commercial species. We show that such two-species regulation under the contract leads to recovery of the commercial stock in the long run. However, if harvesting costs are private information of the fishermen and there is no learning, implementation of the social optimum leads to potential loss of efficiency and requires implementation of second best solution (contract under adverse selection).