Efficiency of Catch and Effort Quotas in the Presence of Risk

A general bioeconomic model is constructed to analyze the efficiency of different methods of fisheries management when there are some risks involved. The model includes the biological dynamics of the fish stock and allows that environmental factors cause stochastic variations in the growth of the fish stock and in the CPUE. The paper develops a method for comparing the efficiency of control variables in stochastic dynamic programming problems and applies it to the case of management of fisheries with catch and effort quotas. Sufficient conditions are derived for the superiority of each of the two management methods. These conditions are used to decide the relative efficiency of these two management methods in simple models. It is shown that the relative efficiency of the two management methods depends on the importance of the stochastic variations in the growth of the fish stock relative to that in the CPUE and on the elasticity of demand. It also matters if the objective of the management is to maximize profits or maximize welfare.