The Valuation of Fisheries Rights: A Real Option Approach
34 Pages Posted: 27 Oct 2018
Date Written: October 2, 2018
Abstract
This article develops and implements a Real Options approach to value renewable natural resources in the case of Marine Fisheries. The model includes two sources of uncertainty: the resource biomass and the price of fish, and it can be used by fisheries to optimally adapt their harvesting strategy to changing conditions in these stochastic variables. The model also features realistic operational cash flows and fisheries can shut down and reopen operations. Using publicly available data on the British Columbia halibut fishery, the required parameters are estimated and the model solved. The results indicate that the conservation of the biomass is both optimal from a financial and a social perspective. The approach could be extended to other fish species and natural resources if the appropriate data were available.
Keywords: Fisheries rights valuation, real options, sustainable harvesting
JEL Classification: Q20, Q22, G10, G13, G31
Suggested Citation: Suggested Citation