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.
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.
Excess and over capacity are key management issues in global fisheries. These issues have also received widespread attention in the literature. Previous work on firm-level investment behavior in fisheries, both theoretical and empirical, typically assumes risk neutral and profit maximizing agents. While this work has led to a much better understanding of the dynamics of investments and capacity both at the firm and the industry level, there is firm-level variation in observed behavior that has yet to be fully explained (see e.g. Nøstbakken, 2012). In this paper, we analyze individual investment behavior in the fishing industry. We use data from a combined web-based experiment and survey of Norwegian fishers conducted in the spring of 2014 to analyze this empirically. In the economic experiment, the participants won real money in a set of lotteries based on their answers and lottery outcomes. Based on their lottery choices, we derive measures of various individual preferences, including time, risk, and social preferences. We combine these preference measures with the fishers' survey responses related to investment decisions made in the last six years, to conduct our empirical analysis. Differences in preferences across owners of fishing firms, which are typically unobservable, can potentially explain a large share of the observed variation in investment behavior found in previous studies. Extending the investment model also has important policy implications as it enables us to predict better the implications of various policies, and to take a step beyond what we can derive from the standard theoretical economic models.