Implications of fishing cost information asymmetry in a non-cooperative fishery: strategic signalling versus biased knowledge

Research output: Chapter in Book/Report/Conference proceedingConference contributionScientific

Abstract

Regarding the straddling fish stocks, management is enforceable only in the framework of cooperation via bi- and multilateral agreements. The prerequisites and stability of international agreements has been analyzed using game theory in the literature. Influence of asymmetric information about fishing costs between countries harvesting the same fish stock has not yet received much attention. Gaps in the knowledge of economic performance of fishing fleets have strategic implications. They can be positive or negative depending on whether a country possesses or does not posses economic information, and whether information is asymmetric or asymmetric and uncertain. Asymmetric information creates problems in a non-cooperative fishery because a country can, by giving false information about fishing costs, manipulate the reaction of the other country not possessing equivalent information about the costs of its adversary. The analysis is parameterized for the North Sea herring fishery where the EU and Norway harvest the same resource. They regulate the fishery in cooperation via an EU/Norway agreement. Information asymmetry is considered as particular parameter sets in a deterministic empirical setting where country 1 has information of its own variable fishing costs but not about the costs of country 2. Country 2 has complete knowledge of the costs of both countries. In the setting we vary the actual fishing costs of country 2 and the costs that country 2 signals to country 1. We also analyze situation where country 2 does not have accurate information of its own costs. The total profits and profits of both countries are calculated using non-cooperative Nash equilibrium. Cost data have strategic value and there are incentives to conceal them in non-cooperative fishery. Country possessing perfect information will never gain the highest profits by signalling correct cost information to the other country. Instead, it will be rational to cheat and signal lower costs than the actual ones irrespective of cost asymmetry between the countries. The value of possessing perfect information is 20-40 million euros, depending on cost asymmetry, during a 10 year period. Another type of a case develops when a country has biased or uncertain knowledge of own fishing costs. In these situations, management schemes are likely to be suboptimal. Moreover, the probability of excessive fishing pressure is higher of the order of magnitude in the presence of asymmetric and uncertain fishing cost information, compared to case when cost information is asymmetric but not uncertain.
Original languageEnglish
Title of host publicationICES CM Documents 2009
Number of pages31
Place of PublicationCopenhagen
PublisherInternational Council for the Exploration of the Sea
Publication date2009
ISBN (Electronic)978-87-7482-079-6
Publication statusPublished - 2009
MoE publication typeB3 Article in conference proceedings
EventICES Annual Science Conference (ICES 2009) - Berlin, Germany
Duration: 21 Sep 200925 Sep 2009

Cite this

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title = "Implications of fishing cost information asymmetry in a non-cooperative fishery: strategic signalling versus biased knowledge",
abstract = "Regarding the straddling fish stocks, management is enforceable only in the framework of cooperation via bi- and multilateral agreements. The prerequisites and stability of international agreements has been analyzed using game theory in the literature. Influence of asymmetric information about fishing costs between countries harvesting the same fish stock has not yet received much attention. Gaps in the knowledge of economic performance of fishing fleets have strategic implications. They can be positive or negative depending on whether a country possesses or does not posses economic information, and whether information is asymmetric or asymmetric and uncertain. Asymmetric information creates problems in a non-cooperative fishery because a country can, by giving false information about fishing costs, manipulate the reaction of the other country not possessing equivalent information about the costs of its adversary. The analysis is parameterized for the North Sea herring fishery where the EU and Norway harvest the same resource. They regulate the fishery in cooperation via an EU/Norway agreement. Information asymmetry is considered as particular parameter sets in a deterministic empirical setting where country 1 has information of its own variable fishing costs but not about the costs of country 2. Country 2 has complete knowledge of the costs of both countries. In the setting we vary the actual fishing costs of country 2 and the costs that country 2 signals to country 1. We also analyze situation where country 2 does not have accurate information of its own costs. The total profits and profits of both countries are calculated using non-cooperative Nash equilibrium. Cost data have strategic value and there are incentives to conceal them in non-cooperative fishery. Country possessing perfect information will never gain the highest profits by signalling correct cost information to the other country. Instead, it will be rational to cheat and signal lower costs than the actual ones irrespective of cost asymmetry between the countries. The value of possessing perfect information is 20-40 million euros, depending on cost asymmetry, during a 10 year period. Another type of a case develops when a country has biased or uncertain knowledge of own fishing costs. In these situations, management schemes are likely to be suboptimal. Moreover, the probability of excessive fishing pressure is higher of the order of magnitude in the presence of asymmetric and uncertain fishing cost information, compared to case when cost information is asymmetric but not uncertain.",
author = "Mika Rahikainen and Marko Lindroos and Veijo Kaitala",
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Rahikainen, M, Lindroos, M & Kaitala, V 2009, Implications of fishing cost information asymmetry in a non-cooperative fishery: strategic signalling versus biased knowledge. in ICES CM Documents 2009. International Council for the Exploration of the Sea, Copenhagen, ICES Annual Science Conference (ICES 2009), Berlin, Germany, 21/09/2009.

Implications of fishing cost information asymmetry in a non-cooperative fishery: strategic signalling versus biased knowledge. / Rahikainen, Mika; Lindroos, Marko; Kaitala, Veijo.

ICES CM Documents 2009. Copenhagen : International Council for the Exploration of the Sea, 2009.

Research output: Chapter in Book/Report/Conference proceedingConference contributionScientific

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N2 - Regarding the straddling fish stocks, management is enforceable only in the framework of cooperation via bi- and multilateral agreements. The prerequisites and stability of international agreements has been analyzed using game theory in the literature. Influence of asymmetric information about fishing costs between countries harvesting the same fish stock has not yet received much attention. Gaps in the knowledge of economic performance of fishing fleets have strategic implications. They can be positive or negative depending on whether a country possesses or does not posses economic information, and whether information is asymmetric or asymmetric and uncertain. Asymmetric information creates problems in a non-cooperative fishery because a country can, by giving false information about fishing costs, manipulate the reaction of the other country not possessing equivalent information about the costs of its adversary. The analysis is parameterized for the North Sea herring fishery where the EU and Norway harvest the same resource. They regulate the fishery in cooperation via an EU/Norway agreement. Information asymmetry is considered as particular parameter sets in a deterministic empirical setting where country 1 has information of its own variable fishing costs but not about the costs of country 2. Country 2 has complete knowledge of the costs of both countries. In the setting we vary the actual fishing costs of country 2 and the costs that country 2 signals to country 1. We also analyze situation where country 2 does not have accurate information of its own costs. The total profits and profits of both countries are calculated using non-cooperative Nash equilibrium. Cost data have strategic value and there are incentives to conceal them in non-cooperative fishery. Country possessing perfect information will never gain the highest profits by signalling correct cost information to the other country. Instead, it will be rational to cheat and signal lower costs than the actual ones irrespective of cost asymmetry between the countries. The value of possessing perfect information is 20-40 million euros, depending on cost asymmetry, during a 10 year period. Another type of a case develops when a country has biased or uncertain knowledge of own fishing costs. In these situations, management schemes are likely to be suboptimal. Moreover, the probability of excessive fishing pressure is higher of the order of magnitude in the presence of asymmetric and uncertain fishing cost information, compared to case when cost information is asymmetric but not uncertain.

AB - Regarding the straddling fish stocks, management is enforceable only in the framework of cooperation via bi- and multilateral agreements. The prerequisites and stability of international agreements has been analyzed using game theory in the literature. Influence of asymmetric information about fishing costs between countries harvesting the same fish stock has not yet received much attention. Gaps in the knowledge of economic performance of fishing fleets have strategic implications. They can be positive or negative depending on whether a country possesses or does not posses economic information, and whether information is asymmetric or asymmetric and uncertain. Asymmetric information creates problems in a non-cooperative fishery because a country can, by giving false information about fishing costs, manipulate the reaction of the other country not possessing equivalent information about the costs of its adversary. The analysis is parameterized for the North Sea herring fishery where the EU and Norway harvest the same resource. They regulate the fishery in cooperation via an EU/Norway agreement. Information asymmetry is considered as particular parameter sets in a deterministic empirical setting where country 1 has information of its own variable fishing costs but not about the costs of country 2. Country 2 has complete knowledge of the costs of both countries. In the setting we vary the actual fishing costs of country 2 and the costs that country 2 signals to country 1. We also analyze situation where country 2 does not have accurate information of its own costs. The total profits and profits of both countries are calculated using non-cooperative Nash equilibrium. Cost data have strategic value and there are incentives to conceal them in non-cooperative fishery. Country possessing perfect information will never gain the highest profits by signalling correct cost information to the other country. Instead, it will be rational to cheat and signal lower costs than the actual ones irrespective of cost asymmetry between the countries. The value of possessing perfect information is 20-40 million euros, depending on cost asymmetry, during a 10 year period. Another type of a case develops when a country has biased or uncertain knowledge of own fishing costs. In these situations, management schemes are likely to be suboptimal. Moreover, the probability of excessive fishing pressure is higher of the order of magnitude in the presence of asymmetric and uncertain fishing cost information, compared to case when cost information is asymmetric but not uncertain.

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