| In recent years, much research has looked at the optimal regulations of open access commercial fisheries. Recognizing that the common property nature of most fisheries leads to an overexploitation of the resource, Economists have supported regulation of commercial fisheries. The assumptions made about the behavior of regulated fishing firms are crucial to the selection of proper regulations. Two assumptions often made about firms are rational expectations and open access, but no one has examined optimal regulations when both of these assumptions are made. Generally one or the other is relaxed. In addition, unlike earlier studies of regulation, investments in fishing boats are assumed to be irreversible, since fishing boats, when no longer needed, are not easily convertible to other forms of capital.;In my model, firms make substantial investments in nonmalleable fishing boats. Thus they have an incentive to make rational forecasts of potential future revenues and will take these forecasts into account when deciding whether to enter. Furthermore, open access guarantees that enough firms will enter so that the net present value of expected revenues is driven to zero. Optimal catch quotas are compared with optimal catch taxes and with the optimal planner's solution. A simulation of the Pacific halibut fishery is run, which shows that catch quotas, which historically have been used, have led to large welfare losses, but that the use of catch taxes would have led to results almost as good, in a welfare sense, as in a centrally planned fishery. These findings are in general agreement with past studies. In addition the simulation suggests that, contrary to the findings of a previous study, imposing the constraint that investments in fishing boats are irreversible does not significantly alter the optimal path of extraction. This result suggests that the issue of irreversibility is insignificant in proposing proper regulations. |
