The Optimal Exploitation of Renewable Resource Stocks: Problems of Irreversible Investment

Abstract

This paper studies the effects of irreversibility of capital investment upon optimal exploitation policies for renewable resource stocks. It is demonstrated that although the long-term optimal sustained yield is not affected by the assumption of irreversibility (except in extreme cases), the short-term dynamic behavior of an optimal policy may depend significantly upon the assumption. It is suggested that the results may have profound implications for problems of rehabilitation of overexploited fisheries and other renewable resource stocks.

Satisfaction with fishing and the desire to leave

“…For many owneroperators, their capital investment in the industry is substantial, and difficulty in finding buyers or alternative uses of the vessel is a substantial barrier to exit (Clark et al 1979;Dichmont et al 2013). In addition, there are a substantial number of excess effort units in the fishery, reducing the value of the business assets to below which the operators feel they are valued (Dichmont et al 2013).…”

“…Issues such as non-malleability of capital (Clark et al 1979) make it easier for capacity to increase in a fishery in response to short-term improvement in economic performance than to exit. While some management systems, such as individual transferable quotas, facilitate autonomous adjustment (Grafton and McIlgorm 2009), such systems are not feasible or acceptable for all fisheries, and the manner in which they are implemented (e.g., total allowable catch setting) can also influence their effectiveness.…”

Environment, irreversibility and optimal effluent standards *

“…cash flows: firm i may be stuck with an excessive stock of capital in the initial period as pointed out by Clark et al (1979), and Bertola and Caballero (1994). Given the abatement technology shown by equation (3), it is equivalent to saying that firm i should regulate its pollution, x i (t) in equation (3), at an upper barrier, denoted by .…”

Options financières et opportunités intertemporelles d’investissement irréversible en incertitude

“…Elle a connu un développement remarquable en économie des ressources naturelles tant renouvelables que non renouvelables ( [13], [29], [39]). Elle a été étendue à l'incertitude ([H], [12], [14], [54]).…”