Harvest and investment Decisions Under Annual and Multiannual Adjustment of Fish Quota

Yearly revisions of Total Allowable Catch under EU policies for the management of North Sea fisheries come at\ud high management costs and capital adjustment costs. It is unclear whether current EU fisheries policy strikes the\ud right balance between the need to regularly adjust fish quota to new information on one hand, and the costs of\ud gathering information and adjusting fisheries capital stock on the other hand. To analyze this question we present a\ud model for a single-species fishery, where a profit maximizing decision-maker jointly determines optimal harvest and\ud capital adjustment levels. Two alternative management systems are compared to the case of sole ownership without\ud policy constraints: annual constrained quota adjustment and multiannual quota adjustment. In the case of\ud unconstrained sole ownership the decision maker optimizes harvest and capital adjustment levels, while under\ud annual constrained quota adjustment change in harvest is constrained by the harvest level of the previous year.\ud Under multiannual quota adjustment capital adjustment is optimized on an annual basis while harvest is fixed for a\ud longer period. We analyse quota adjustment in a stochastic setting, and compare results for the total discounted net\ud benefits that include management costs and fishermen’s capital adjustment costs. For the purpose of illustration we\ud apply the model to North Sea plaice. Results of annual constrained quota adjustment show that as the system\ud becomes more rigid the optimal harvest policy changes less between different levels of previous harvest.\ud Consequently, as harvest in the previous period increases fewer investments are required. Results of multiannual\ud quota adjustment show that both optimal policies change very little as the frequency of harvest change decreases.\ud The change in optimal policies, however, decreases together with decreasing frequency of harvest change