What is it about?
Scientific evidence reveals that renewable resource stock dynamics are subject to uncertainty due to changes in environmental conditions. Despite its critical impacts on management, little is known about the effects of such uncertainty on the formation of regional fisheries management organizations (RFMOs). In this paper, we design a dynamic stock recruitment framework to examine this issue in a common pool setting. We find that stock growth uncertainty critically affects equilibrium behaviors under both open loop membership and dynamic membership. For instance, we delineate conditions under which uncertainty induces full non-cooperation in equilibrium. Strategic behaviors may also shift equilibrium outcomes from full non-cooperation under deterministic conditions to full cooperation under uncertainty when countries anticipate a small environmental variability. Moreover, strategic interactions to extract the resource stock may lead to higher individual payoffs under uncertainty. We also outline the differences in equilibrium responses of membership, harvest, and payoff to mean preserving spreads under both open loop membership and dynamic membership.
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Why is it important?
Our analysis sheds new light on factors that shape incentive to join RFMOs. Several economic papers argue that equilibrium coalitions cannot support more than two members under deterministic conditions or exogenous uncertainty. Other prominent contributions find that the fully cooperative solution can be reached in a sub-game perfect Nash equilibrium when punishment strategies are allowed. In this paper, we identify two novel elements that can also be critical factors in the ability to achieve large scale RFMOs. First, under the CRRA utility and CES growth functions, strategic interactions may give rise to full cooperation in equilibrium. Second, uncertainty in the context of CRRA utility and CES growth functions, can shift the equilibrium outcome from full non-cooperation under deterministic conditions to full cooperation under uncertainty.
Perspectives
Our analysis contributes to an ongoing international policy debate regarding management of shared fish stocks. To mitigate over-exploitation related problems, the United Nations urges to manage marine resources in international waters through RFMOs. Meanwhile, the growth rates of such resources are subject to random shocks generated by environmental variability. This paper provides a novel attempt to formally investigate the effects of climate variability on countries’ willingness to join RFMOs and associated harvest decisions. As such, our results may help inform governments, social scientists and societal stakeholders about potential conservation benefits and economic returns associated with membership in RFMOs (e.g., the North Pacific Anadromous Fish Commission).
Bruno Nkuiya
University of California Santa Barbara
Read the Original
This page is a summary of: Stability of international fisheries agreements under stock growth uncertainty, Journal of Environmental Economics and Management, April 2022, Elsevier,
DOI: 10.1016/j.jeem.2022.102664.
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