Generating enhanced fishery rents by internalizing product quality characteristics

This paper demonstrates how additional rents are generated in a fishery characterized by intraseasonal variation in fish characteristics, including size, condition, and composition. Based on an expanded conceptual model of the optimal harvest rule, fish characteristics affect pre and post harvest production yields and output prices. A dynamic empirical model, which uses a system of quality characteristics and an hedonic equation, illustrates the complex relationships and management choices associated with internalizing seafood quality characteristics in a hake fishery. The model retains the regulated open access management system, but controls intertemporal and intersectoral quotas, production portfolios, and total allowable catch. Results demonstrate that including revenue-side effects from internalizing fish quality can generate significantly greater rents and reduce the relative benefits of increased production yields. If excluded, bioeconomic models can underestimate the level of regulatory rent dissipation and overemphasize management objectives such as full utilization, which could misdirect processing decisions and result in a suboptimal resource management plan. Implications for data collection, multidisciplinary analysis, and improvements in marine resource management are discussed.