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ABSTRACT. The current paper extends the coalition approach of the management of high seas fisheries to the presence of externalities. The coalition approach is set within the framework of a two‐stage game in which the payoffs depend on the entire coalition structure and are determined through a partition function. The relationship between the presence of externalities and the stability of the coalition structures is explored. The equilibrium coalition structures of the game are also examined. The application of the game to the Northern Atlantic bluefin tuna shows a typical picture of the high seas fisheries: the simultaneous presence of strong externalities in the coalition structures and the absence of stability of the grand coalition. A fundamental conclusion of this paper is that, generally, in order to guarantee the stability of the cooperative agreements it is not sufficient to implement a fair sharing rule for the distribution of the returns from cooperation. Stability requires a legal regime preventing the players that engage in noncooperative behavior from having access to the resource.

In this paper the management of straddling fish stocks is approached through a coalition game in partition function form. A two-stage game is applied, assuming ex ante symmetric players and the classical Gordon-Schaefer bioeconomic model. It is shown that the game is characterized by positive externalities — the merger of coalitions increases the payoffs of players who belong to other coalitions. A key result is that, apart from the case of two players, the grand coalition is not a Nash equilibrium outcome. Furthermore, in the case of three or more players the only Nash equilibrium coalition structure is the one formed by singletons. The results indicate that the prospects of cooperation in straddling stock fisheries are low if players can free ride cooperative agreements. Thus, in order to protect cooperation, under the aegis of regional fishery management organizations, unregulated fishing must be prevented.

According to international law, straddling fish stocks should be managed cooperatively through Regional Fisheries Management Organizations (RFMOs). This paper analyzes the stability and success of these organizations through a game in partition function form based on the classical Gordon-Schaefer bioeconomic model. It is shown that the larger the number of fishing states that compete for the fish stock the higher are the relative gains from full cooperation, but the lower is the likelihood of large RFMOs being stable. Moreover, the success of coalition formation is positively correlated with the degree of production cost asymmetry among fishing states and negatively with the overall level of efficiency. JEL References: C72; Q22.Keywords: straddling fish stock, regional fisheries management organizations, unregulated fishing, bioeconomic model, coalition formation model, free-riding. 1 IntroductionThe 1982 UN Convention on the Law of the Sea (UN, 1982) brought forth the regime of 200 nautical miles coastal state Exclusive Economic Zones (EEZs), which revolutionized the management of world capture fisheries. However, an important aspect was not effectively addressed by the 1982 UN Convention, namely the management of fisheries resources to be found both within the coastal state EEZ and the adjacent high seas, where the resources are subject to exploitation by so called distant water fishing states. These fishery resources are commonly referred to as straddling fish stocks 2 .Such fish stocks, which account for about 20 per cent of the worlds capture fishery harvests (Munro et al. 2004), were subject to heavy overexploitation in the decade following the advent of the 1982 UN Convention. This led to further action by the UN in the first half of the 1990s, resulting in a supplement to the 1982 UN Convention in the form of an international agreement, popularly known as the 1995 UN Fish Stocks Agreement (UN, 1995 Since membership in RFMOs is voluntary, straddling fish stocks can be regarded as common pool resources shared between RFMOs' members and non-members. Thus, the level of participation and the stability of these organizations in effectively mitigating overfishing are key issues on the management of straddling fish stocks. These issues have mainly been addressed using game theory. For instance, Kaitala and Munro (1997), based on the classical dynamic fisheries bioeconomic model (Clark and Munro, 1975), study the threat to cooperative agreements posed by prospective new members by comparing the charter members' payoffs under a cooperative solution and under complete non-cooperation. Hannesson (1997) and Tarui et al. (2008) analyze the prospects of achieving full cooperation through threat of punishments using dynamic games. Empirical studies on the prospects of cooperative agreements have also been undertaken, e.g. by Kennedy (2003) and Lindroos (2004).Recently, the partition function approach has been applied to study coalition formation in fisheries (e.g. Pintassilgo, 2003, andPham Do andFolmer, 200...

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