Heterogeneous Agents and Mechanism Design in Cooperative Resource Management: Licensing Considerations for a Tuna Coalition in the Pacific Ocean

Talagi, Deveraux
Tarui, Nori
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The Pacific Ocean contributes more than 50 percent to global tuna production. The central and eastern regions have the most productive tuna fisheries in the Pacific. These regions include countries that are signatories to the Parties to the Nauru Agreement (PNA), a coalition of eight countries rich in tuna resources. In 2007 the PNA introduced the Vessel Day Scheme (VDS), an effort or input based management scheme. Under the VDS, licenses to fish in PNA exclusive economic zones (EEZ) are sold on a ‘per-day effort’ basis. Each member country is assigned a share of the licenses which are specific to each country. Each country is responsible for the sale of its licenses, the majority of which are sold by auction to foreign fishing fleets. A key aim of the PNA countries is to ensure the future health of the fishery, while maximizing the returns from this important source of income. This thesis attempts to contribute to this effort by examining the PNA and the VDS to analyse two key questions. The first question is whether the PNA should switch from the VDS to an output based regulation scheme, where licenses are sold based on the catch size. As an effort based scheme, the VDS has only indirect control of the landed catch size of each vessel, and a key criticism is that there is no upper limit on the size of the catch. Not only could the catch value be higher than the license revenue, this has also led to concerns about the sustainability of the fishery. The second question is whether a single global license allowing access to all countries would have any significant benefits over the current licenses which are specific to each country. Basic economic theory suggests that selling licenses individually yields lower revenue levels, relative to selling licenses as a coalition. However, a key consideration is a sharing rule that would be used to distribute revenue shares from a single license. An independent review of the VDS in 2014 recommended these two issues, among others, for further analysis. I address these questions in three steps. First, I introduce heterogeneity of fishing vessels into the standard textbook model for a single fishery and show that in this single country case, revenue from output regulation is always higher relative to input regulation. Although this result is important, it provides limited insight into a multi-country setting such as the PNA, which has additional dynamics between countries. Second, extending this model to a two country case the analysis suggests that under ideal conditions, output regulation still yields higher income levels. However, in this multi-country setting each fishing vessel has to choose which country to buy licenses from. This additional dynamic reveals that without the assumption of perfect information for the fishery manager, achieving the target harvest and stock levels set by the manager can be difficult. Finally, I compare the returns from selling a single global license relative to individual local licenses by developing a revenue sharing mechanism based on the distribution of fish stocks over each member country. The results show that a single license not only yields greater revenue levels, but also provides a more stable revenue stream over time.
Economics, Natural resource management, Cooperative resource management, Fisheries economics, Heterogeneous agents, Mechanism design, Parties to the Nauru Agreement, Tuna coalition
137 pages
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