The Effects of Bycatch Relationships on Quota Prices

Presented as a Report to the Ministry of Fisheries

Because some species are caught jointly, fishers who want to catch one must own quota for the other. This has both ecological and economic implications. Previous literature on the economics of bycatch includes (Boyce 1996), (Larson, Brett et al. 1998), (Squires, Cambell et al. 1998), (Neher 1988) and (Squires and Kirkley 1995).

Most existing literature either theoretically models bycatch relationships or discusses the problems and approaches to management when there are significant bycatch relationships. We focus instead on the market implications.

A joint production relationship means that the lease prices of the quota should be related. We test this idea using a specific instance where the bycatch relationship is clear and simple. We use observer data to identify the relationship between hoki and hake catches, both spatially and temporally. This offers a simple 'natural experiment' where the level of bycatch varies across space and time and we can study the effect of this variation on the relationships between the quota lease prices. We first develop a more formal model of the joint determination of lease prices. We use this to develop testable hypotheses about lease price relationships.

We then develop the dataset on bycatch intensity and link these data to our other data on quota lease prices and their determinants. Finally we test our hypotheses.