Forholdet mellem regulator prinsipal og fiskere agent

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Forholdet mellem regulator (prinsipal) og fiskere
(agent)

• Niels Vestergaard
• Centre for Fisheries Aquaculture Management
  Economics (FAME)
• University of Southern Denmark

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Information critical for efficient management
may be hard to centralize, or be asymmetric
(people have different information), leading to
inefficent management. Broadly viewed, natural
resource problems are problems arising from
incomplete and asymmetric information combined
with incomplete, inconsistent, or unenforced
property rights (Hanna, Folke and Maler 1996)
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• Bergen conference 1997
• Annual discards of commercial species in the
  North Sea fisheries is at least 1/3 of the
  catches
• Herring, mackerel and cod stocks are depleted
• Sole, plaice, haddock and saithe stocks are close
  to their lowest recorded levels
• The present control system has limited effect and
  does not prevent misreporting

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North Sea cod fishing mortality
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Another illustration

• Fra ACFM rapporten om torsk i Kattegat (2004)
• The TAC is implemented by period rations for
  individual vessels. Ration sizes have been low in
  recent years and may have created incentives to
  discard (high-grade). As ration size has been
  higher in the Western Baltic there have been
  incentives for writing Kattegat catches into the
  Western Baltic. The recovery plan, agreed in
  2004, stipulates strict rules for carrying and
  landing cod in Kattegat.
• Discards are not included in the assessments, and
  their magnitude is unknown. Essential assessment
  data (70 of landings) are only available from
  Denmark for 2003.

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Observations

• Monitoring actual fishing practice is impossible
  due to the characteristic of the fish stock and
  hence control is incomplete
• Regulator therefore often lacks information,
  either information which the fishermen have or
  information which is due to uncertainty
• As a result regulation often fail to fulfil its
  goals

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Observations 2

• As a response, either the current regulation can
  be refined or the focus is changed towards
  correcting the control policy.
• However, the design of the management scheme can
  change substantial if the regulator decides to
  take the information problem explicitly into
  account.

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The importance of uncertainty and asymmetric
information
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Asymmetric Information

• Fishermen is better informed about a variable or
  a function than regulator (society).
• Standard instruments can not be used.
• The concepts moral hazard and adverse selection
  become important.
• The principal-agent approach can be used, setting
  up an incentive scheme.

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Catches Moral Hazard

• Illegal landings and discard as a moral hazard
  problem that arises under quantity regulation,
  because individual catches are unobservable.
• Using the Segerson approach from nonpoint source
  (NPS) pollution, a tax scheme can be designed to
  secure optimal individual catches using stock
  size as the tax base.

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The Mechanism

• Ti(x) ti(x x)
• where
• x is the observable actual size of the fish
  stock.
• x is the optimal stock size.
• Ti(x) is the tax function for fishermen i.
• ti is the tax/subsidy rate, which can vary
  between fishermen.

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Society problem

• Max ?(E(phi ci(x, hi)))
• x, h1,..hn
• s.t.
• G(x) ?E(hi) 0
• where
• G(x) is the natural growth rate. It is assumed
  that G(x) gt 0 for x lt xMSY and G(x) lt 0 for x gt
  xMSY.
• E is an expectation operator.

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Fisherman behavior

• Max phi ci(x, hi) (Ti(x))
• hi
• s.t.
• x Ni(hi, h-i)
• Ni(hi, h-i) is an expression for how fisherman i
  perceives that the stock size is influenced by
  catches.
• h-I are catches for all fishermen than fisherman
  i.

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Fisherman behavior

• Max phi ci(Ni(hi, h-i), hi) (tix - ti
  Ni(hi, h-i)
• hi
• The first-order condition with Cournot-Nash
  expectations is
• p ?ci/?Ni ?Ni/?hi- ?ci/?hi ti ?Ni/?hi 0

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Optimal Tax Structure

• The first-order condition for society is
• p E(?ci/?hi) E(?ci/?x S-i ?cj/?x)
• Alignment of the first-order conditions gives
• ti Q/(?Ni/?hi)
• where
• Q the marginal social benefit of catches beyond
  optimal catches (Qlt0).

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Catches Moral Hazard
Individual variable tax rates
Trawlers between 50 GT and 199 GT
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Discussion

• Lump-sum transfer back to the industry
• Information requirements
• Individual biological response function
• Fishermen react to the stock tax
• Alternative to control policy or quota policy
• The analysis is a steady state analyse

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Costs Adverse Selection

• Society tries to collect private information
  about the cost function.
• It is possible, throughout inclusion of incentive
  compatibility restrictions in principal-agent
  analysis, to design a tax or subsidy mechanism
  that secures correct revelation of cost types.
• The price of correcting two market failures with
  only one policy instrument is that some
  inefficiency must be accepted. In other words, a
  second-best optimum is reached.

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Costs Adverse Selection 2

• The inefficiency arises as an information rent
  that is given to the most efficient types in
  order to give these types an incentive to reveal
  themselves.
• Because of the resource constraint the standard
  Principle-Agent result do not hold for fisheries,
  the low cost agent must be allowed a higher
  effort level than under full information.

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Costs Instrument choice (result)

• With asymmetric information about cost, it can be
  shown that the so-called Weitzman result holds
  for a schooling fishery but not for a search
  fishery.
• The reason for this result is that there is
  interaction in the cost function between stock
  size and catches in a search fishery.

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Costs Instrument choice 1

• Fisheries economics Taxes or ITQs
• With regard to ITQs (property rights) it is often
  argued that they are expensive to implement.
• Purpose of the paper Are taxes better than ITQs
  under imperfect information?
• The pollution control literature Taxes and
  transferable permits are not equivalent under
  imperfect information. A classical article is
  Weitzman (1974).

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Costs Instrument choice 2

• The result in Weitzman (1974)

is the relative advantage of price over quantity
regulation. is the variance of the error in
marginal costs. C is the curvature of the total
cost function. B is the curvature of the
benefit function.
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Costs Instrument choice 3

• Four conclusions
• Under full information it does not matter if
  taxes and transferable permits is used
• It does not matter for the choice between price
  and quantity regulation if there is imperfect
  information about benefit
• If there is imperfect information about costs
  price regulation is preferred over quantity
  regulation, if the marginal cost function is
  steeper than the marginal benefit function
• Transferable permits are preferred over taxes if
  the marginal benefit function is steeper than the
  marginal cost function.

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Costs Instrument choice 4

• Assumptions
• The fishing fleet is homogeneous and entry and
  exit can be excluded
• The fishermen disregards the resource restriction
• Long run economic yield is maximised
• Steady-state is assumed
• q is aggregated catches, x is stock size and p is
  the price
• C(q, x) is the cost function, B(q) is the revenue
  function and F(x) is the natural growth.

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Costs Instrument choice 5

• Assuming a schooling fishery, i.e. C(q, ?) or
• Assuming a schooling fishery with search cost,
  i.e. an additive separable cost function C(q, ?)
  C(x), the Weitzman result can be generalized
  to fisheries
• But for a search fishery C(q, x, ?) is it not
  possible to generalized, hence impossible to say
  anything about the instrument choice

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Costs Instrument choice 6

• For schooling fisheries, taxes are preferred over
  ITQs, if the marginal cost function is steeper
  than the marginal revenue function.
• That there is room for using taxes as an
  instrument is a fishery policy recommendation
  that can be drawn from the analysis.

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Conclusions

• By introducing asymmetric information in the
  analysis of fishery policy, it is possible to
  analyse fishery problems in practice related to
  illegal landings and discards.
• New types of policy schemes are developed,
  incentives contracts, which are menus of
  different taxes (multiple market failures).

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Conclusions 2

• As many fisheries operate with licenses,
  introducing such contracts could be
  straightforward.
• However, more empirical work is needed and
  development of more realistic teoretical models
  are also needed.