Individual Value-Driven Rent Dissipation in Limited-Entry Fisheries: Experimental Evidence Public Deposited

http://ir.library.oregonstate.edu/concern/conference_proceedings_or_journals/t435gd930

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  • Economists have devoted considerable attention to rent-dissipation in limited-entry fisheries as a result of excessive use of capital inputs, or "capital stuffing." We may refer to this mechanism of rent dissipation as "cost-driven rent dissipation." An alternative potential mechanism of rent dissipation, which we refer to as "value-driven rent dissipation," may occur if limited-entry management causes fishermen to receive a lower price for their fish than would be possible under an alternative management system. In theory, value-driven rent dissipation may occur if the marginal value to a fisherman from fishing differently (for example, more slowly to take better care of the fish and improve quality) is positive but less than the marginal cost from a reduced catch share. This paper describes an economic experiment to study value-driven rent dissipation in a limited entry fishery. Following an approach developed by Knapp and Murphy (2010), subjects "fish" competitively for beans by scooping them out of a large bowl and "delivering" them to a pitcher. Given the choice of delivering to a pitcher placed close by for a lower price or a pitcher placed farther away for a higher price, unless the price differential is sufficiently high, subjects choose the closer but lower-priced pitcher. With the introduction of an individual quota to replace the competitive fishery, value dissipation ends as subjects choose the higher-priced pitcher. This simple experiment provides a powerful demonstration of a less-appreciated mechanism of rent dissipation, which is useful for both research and teaching.
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  • Dunham, Gabe, Joel Ainsworth, Jim Murphy and Gunnar Knapp. 2010. Individual Value-Driven Rent Dissipation in Limited-Entry Fisheries: Experimental Evidence. 10 pages. In: Proceedings of the Fifteenth Biennial Conference of the International Institute of Fisheries Economics & Trade, July 13-16, 2010, Montpellier, France: Economics of Fish Resources and Aquatic Ecosystems: Balancing Uses, Balancing Costs. Compiled by Ann L. Shriver. International Institute of Fisheries Economics & Trade, Corvallis, Oregon, USA, 2010.
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