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

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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.
  • Keywords: Fisheries Economics, Fish and Aquaculture Sectors Development, Contributions of Fisheries to Socioeconomic Wellbeing
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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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  • US National Oceanic and Atmospheric Administration (NOAA) Fisheries Division, Agence Française de Développement, Ministère de l’Enseignement Supérieur et de la Recherche, Ministère de L’Alimentation de L’Agriculture et de la Pêche, Ministère de l’Énergie, du Développement Durable et de la Mer, La Région Languedoc Rouslilon, Département Hérault, Montpellier Agglomèration, The Department of Fisheries and Oceans, Canada, and AquaFish Collaborative Research Support Program (CRSP).
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