Working Paper: NBER ID: w25140
Authors: Jose Pizarro; Eduardo S. Schwartz
Abstract: This article develops and implements a Real Option approach to value renewable natural resources in the case of Marine Fisheries. The model includes two sources of uncertainty: the resource biomass and the price of fish, and it can be used by fisheries to optimally adapt their harvesting strategy to changing conditions in these stochastic variables. The model also features realistic operational cash flows and fisheries can shutdown and reopen operations. Using publicly available data on the British Columbia halibut fishery, the required parameters are estimated and the model solved. The results indicate that the conservation of the biomass is both optimal from a financial and a social perspective. The approach could be extended to other fish species and natural resources if the appropriate data were available.
Keywords: fisheries; real options; sustainability; biomass; harvesting policy
JEL Codes: G10; G13; G31; Q20; Q22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| biomass (Q42) | optimal harvesting policy (Q28) |
| price of fish (Q22) | optimal harvesting policy (Q28) |
| optimal harvesting policy (Q28) | sustainability of the fishery (Q22) |
| biomass (Q42) | overfishing (Q22) |
| sustainability of the fishery (Q22) | conservation efforts (Q20) |