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.
We develop a theoretical model to address the effects of different market structures on the ex-vessel prices and consequently how this would impact the risk-sharing mechanism for harvesters and processors in fisheries. We focus our research on two market structures, price-at-landing (PL) and post-season pricing (PS). PL market structure is where ex-vessel prices are determined between harvesters and processors prior to realization of wholesale prices. PS market structure, modelled after Bristol Bay salmon ex-vessel market, is where a harvester signs a contract with a processor prior to the season without knowing how much they are getting paid at the end of the season. Then the ex-vessel prices are determined by processors after realization of wholesale prices. Our model show that when there is no uncertainty in wholesale prices, PL yields higher or equal ex-vessel prices than PS. With certainty, the bargaining power harvesters forgone by signing a contract may be translated into processors' market power in which may result in lower ex-vessel prices. When we introduce uncertainty in wholesale prices, PS yields higher ex-vessel prices than PL. With uncertainty, PS functions as a way for risk-adverse processors to share part of their wholesale price uncertainties with harvesters. In exchange, harvesters get higher ex-vessel prices. We also test out the model in a controlled-laboratory experiment setting. Our experiment data supports conjectures obtained from the theoretical model.