Irreversible Investment and Optimal Fisheries Management: A Stochastic Analysis

Abstract

In recent years, attention has been devoted to fishery management problems that arise because capital embodied in fishing fleets is often nonmalleable, having few if any alternative uses. This problem of irreversible investment was analyzed by Clark et al. (1979), using a deterministic model. In reality, however, most investment decisions must be made within an uncertain environment. This paper describes recent efforts to account for uncertainty in analyzing the problem of optimal fishery investment, where the uncertainty is caused by stochastic variability in the resource stock from year to year.

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