Strategic behaviour in fisheries management Practical applications. Associate Professor Lone Grønbæk Kronbak University of Southern Denmark

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1 Strategic behaviour in fisheries management Practical applications Associate Professor Lone Grønbæk Kronbak University of Southern Denmark

2 Outline Baltic Sea cod fishery; Example of application of c-games, sharing rules and stability. Kattegat/Skagerrak Mixed Trawl fishery; Economic and ecological consequences of disregarding the fishery as a multi-product industry in the management perspective

3 Unique brackish area The Baltic Sea Cod Fishery A total water exchange with the North Sea takes app. 35 year Cod is the most valuable fishery The eastern cod stock is outside safe biological limits (ICES 2004)

4 The Baltic Sea Cod Fishery Shared resource: the sea is divided according to 200 nautical miles Countries around Baltic Sea were all members of IBSFC IBSFC sets regulation based on ICES advise Main regulatory tool is TACs

5 Objective of IBSFC "co-operate closely with a view to preserving and increasing the living resources of the Baltic Sea and the Belts and obtaining the optimum yield, and, in particular to expanding and co-ordinating studies towards these ends,..." Source: Article 1 of the Gdansk Convention, signed 1973

6 1000 tonnes The Baltic Sea Cod Fishery catches and TACs Harvest TAC

7 Characteristic function games or CFG aim at finding a fair distribution of benefits A purely cooperative game (all players cooperate) n-players Characteristic Function Games Benefits freely transferable Maximum benefits are preferable for all players Interpersonal utility comparisons

8 How to set up a CFG? Set up a bio-economic model Growth function Harvest function Profit function Derive the profit and strategies for all possible coalition structures Find the (normalised) characteristic function Solve for sharing imputations Shapley, nucleolus, Satisfactory nucleolus

9 Motivation Empirical studies applying CFG: Speceial Issue of MRE (2000): Lindroos & Kaitala, Arnason, Magnusson & Agnarsson, Costa-Duarte, Brasão & Pintassilgo, Brasão, Costa-Duarte & Chunha-e-Sá (2000) Determine different sharing rules but these sharing rules does often not satisfy all players. These CFG does not take externalities into consideration.

10 When are externalities in a coalition game present? If and only if there is at least one merger of coalitions that changes the payoff of a player belonging to a coalition not involved in the merger Example: Player 1, player 2 and player 3 plays a game with a Nash outcome (singleton values) If Player 1 and 2 form a coalition (1,2) this changes the payoff to player 3, now called free rider value.

11 Lindroos & Kaitala (2000) Shapley values: (10920, 9500, 2900) nucleolus: (10940, 9920, 2140)

12 Kronbak & Lindroos (2007) Traditional CFG does not take into account that: in fisheries game the externalities imply that free riding does not yield the same pay-off as in a non-cooperative solution. Therefore stand-alone stability can be hard to achieve due to free riding behaviour. Suggest a sharing imputation in a characteristic function game which is free rider stable or stand alone stable. Applied the case study of the Baltic Sea Cod fishery

13 Defining the Satisfactory nucleolus Redefine the set of sharing imputations, X sat : x i v freerider v M (Individual satisfaction) x 1 x2 x3 1 (Group rationality) Calculate the satisfactory nucleolus as the original nucleolus. The satisfactory nucleolus is free rider stable.

14 Bio-economic Model Discrete time Single species Age-structured biological model (6 cohorts) Beverton-Holt stock-recruitment relationship (simulated from ICES 2000) Simulation length: 50 years ( )

15 Bio-Economic Model (cont d) 3 players/groups of countries Players commit to fishing mortality only in the beginning of the game Players move simultaneously Cost function squared in harvest and inverse in stock; players differ in cost parameter c1>c2>c3 Prices are assumed identical and constant

16 Optimal Strategy and Benefits Player Strategy (f) NB (10 10 DKR) FR value (10 10 DKR) Norm. C- function , (f 3 =0.26) , (f 2 =0.28) , (f 1 =0.35) ,2, > 6.98 (sum) 1

17 Player 2 1 Possible Sharing Imputations 0 1 Player 1

18 Sharing Rules Percentage of cooperative benefits received Player Shapley Nucleolus Free Rider Sat. nucleolus % 33.3 % 38.1 % 40.3 % % 33.3 % 28.2 % 30.4 % % 33.3 % 27.1 % 29.3 %

19 Limitations of Characteristic Function Games Assumes that the grand coalition is already formed Hard to calculate for many players should also check for sub-coalitions. Not the most appropriate framework to deal with externalities as the payoff of a given player does not depend on the overall coalition structure. For determining fair sharing rule the approach is satisfactory (taken the above assumption has to be taken into consideration) For other purposes apply the partition function approach.

20 The mixed trawl fishery in KT/SK 4 economically important species (Norway lobster, cod, sole, plaice) Denmark (75 %), Norway and Sweden take part in the fishery Norway lobster and Atlantic cod have a catch value more than two thirds of the total value of landings.

21 The mixed trawl fishery in KT/SK In 2003 there where 340 vessel with Norwegian Lobster in their landings from Kattegat and Skagerrak. The Danish Directorate of Fisheries risk-ranked these species to have a high risk of overexploitation.

22 Parallel agreements WORK IN PROGRESS (Kronbak & Lindroos) Parallel management agreements when regarding fisheries as multi-product industries Recognising the interlink of harvests above sea-level

23 Motivation Traditional game theoretic literature applies one species models. Actual fisheries are multi-product industries or have a bycatch of another also valuable species (which may or may not be target species for another fishery)

24 Definitions On the agreement among players level: Joint management; the players cooperate to jointly achieve the highest joint economic rents from the fishery Non-cooperative management; the players adapt a Nash behaviour and apply their mutually best response maximising own economic rent from the fishery

25 Definitions On the multispecies/single species management approach: Multi-species management approach; the players consider maximising the economic rents from all species in their multi-species fishery when determining their effort levels. Single species management approach; the players consider maximising economic rent from a single (target) species when determining the effort to be employed in the fishery.

26 Research questions Consequences of ignoring parallel agreements; Comparing multi-species to single species joint management approach. To be continued with Consequences of ignoring joint management; Comparing non-cooperative to joint management taking a multi-species approach. Comparison; Which of the above problems are the most severe to the stocks and to the economic rents from the fishery.

27 Methods and methodology 2 profit maximising agents; 1,2 2 common pool, natural resources; x, y biological independent logistic growths Schaefer harvest function Constant marginal harvesting costs

28 Methods and methodology Equilibrium use of the fish stock over time

29 Consequences of ignoring parallel agreements Multi- vs single species cooperative management Cooperative solution to the multi-species management Calculate optimal effort of joint action if both stocks are treated in same bio-economic model with a non-selective harvest. s.t. equilibrium stocks

30 Consequences of ignoring parallel agreements Multi- vs single species cooperative management Cooperative solution to the single species management Calculate optimal effort of joint action if stocks are treated in different bio-economic model. q 1x >q 2x and q 2y >q 1y s.t. equilibrium stocks function of E 1 and E 2, respectively

31 Consequences of ignoring parallel agreements Effects on stocks and rent Stock size/rent from multi-species management minus (-) Stock size/rent from single-species management

32 Consequences of ignoring parallel agreements Stock difference, Cod q 1x >q 2x and q 2y >q 1y q 2x =1-q 1x q 1y =1-q 2y Joint management

33 Consequences of ignoring parallel agreements Stock difference, Norway lobster q 1x >q 2x and q 2y >q 1y q 2x =1-q 1x q 1y =1-q 2y

34 Consequences of ignoring parallel agreements Total rent difference q 1x >q 2x and q 2y >q 1y q 2x =1-q 1x q 1y =1-q 2y

35 Conclusions The paper shows the potential of not taking into consideration the consequences of fisheries being a multi-product industry with bycatches. The stocks may be lower in a joint multi-species management but this is due to the non-selective harvest gear and the consideration of a joint economic benefit from the species

36 Thank you for your attention!