Essays on behavioral economics of fishery

Abstract

The aim of this dissertation is to apply frontier microeconomic theories to provide additional insights into the economic behaviors of fishermen. In particular, we investigate how a fishing vessel's captain or owner makes two of the most important decisions in the fishing business using Hawaii-based longline fishery as a case study. One decision relates to the choice of remuneration practice; the other is concerned with the fishing trip length. The underlying factor of these decision-making processes is the risk behavior of the vessel's captain or owner. The role of risk preferences in the decision-making process is especially emphasized in the context of such a risky profession as fishery. Given that, we also explore the question whether fishermen have different risk patterns from workers in other occupations. Most previous studies addressed this question from the expected utility theory perspective and assumed that fishermen like other workers are risk-averse. In this research, we address this question by applying prospect theory and experimental economics methodology to directly estimate the parameters used as proxy for risk behavior as well as to explore how these parameters are determined. The dissertation essays make contribution to the field of fishery economics in the following ways: 1. Developed a framework of decision-making behavior on the choices of remuneration practices in fishery based on the principal-agent theory. Empirically, we apply the switching regression model to check if the theoretical prediction reflects experience of Hawaii's longline fishery. 2. Developed a procedure to estimate the risk parameters of prospect theory's utility function which provides a more complete description of preferences, but is also more complex to estimate than the utility function portrayed by expected utility theory. In terms of research methodology, we match experimental data with survey data. The combination of data from experimental economics surveys and household data allows us to estimate the prospect theory parameters and to explore how these parameters are determined. 3. Applied the target revenue model, a version of prospect theory, to see how having target revenue may have an impact on the captain's decision on the length of a fishing trip. This alternative approach may result in different prediction from the standard model regarding the relationship between daily fishing revenue and the number of fishing days. To investigate which model provides a more reasonable description of the reality, we look at the empirical evidence from the Hawaii-based longline fishery. The dissertation includes three essays. In the first essay, we investigate a recent phenomenon in the remuneration system in the context of Hawaii-based longline fishery. Specifically, I aim at answering the question why fixed wage has become more popular than share contract in the Hawaii's longline fishery. In the second essay, I address risk behavior of Vietnamese fishermen by applying prospect theory and data from an economic experiment in Vietnam. In the third essay, the target revenue model, a version of prospect theory, is used to explain how decision on the number of days for a fishing trip is made in the context of the Hawaii-based longline fishery.