Operational tools and adaptive management

w0 implies compensation to the fishers. The characteristics of the two parameters in the
incentive scheme, i.e. how they vary with the interest weights and other exogenous variables
and parameters, are given in table 3.3.
Table 3.3 Characteristics of the parameters in the optimal incentive scheme
λ1 MS λ1 F λ3 MS λ3 F λ2 MS λ2 F Outside
option, U F0
W + - - + ? ?
w0 - + + - ? ? -
Outside option, U F0 , denotes the pay-off to the agent (fishers) if they do not accept the
incentive scheme.
The optimal tax/subsidy rate increases in the environmental interests of the national
, and decreases in the environmental interests of the fishers, . The latter is
1 1
obvious because with more environmentally concerned fishers the need for strong incentives
to limit effort is lower, and thus the tax can be set lower. High environmental concern on
behalf of the fishers implies a lower tax rate, and for given values on the other model
variables (see annex 4) this makes it more likely that the tax rate is negative, i.e. a subsidy
rate. Further, w unambiguously decreases in the social interests of the national authorities,
authorities, MS
MS
, and increases in the social interests of the fishers, . The former is due to the fact that
3 3
high social interests imply that the authorities prefer high effort in order to keep high
employment in the fisheries. Then they are not interested in limiting effort by the use of a
high tax rate.
The economic interests of the authorities, MS
, and the fishers, , have ambiguous effects
2 2
an the tax/subsidy rate, w. On the one hand, high economic interests for the fishers imply that
they will wish to have a high harvest, and thus they set a high effort. To deter this, the
authorities will set a high tax rate. On the other hand, when effort is already high, increasing
effort will reduce the net income, and then the fishers have no interest in further increasing
effort. In turn, there is then no more need for the authorities to increase the tax rate in order to
deter the fishers from increasing effort. The same argumentation goes for the authorities.
Remembering that w0 is formulated as a lump sum transfer from the fishers to the authorities,
it is the case that the higher the alternative income to the fishers if they retreat from the
fishery (the outside option) is, the more likely it is that the lump sum transfer is negative, i.e.
that it is compensation to the fishers. The reason is that we have assumed homogenous fishers,
which means that if one fisher wishes to retreat from the fishery all fishers will retreat, and as
long as the authorities have a positive pay-off from the fishery activity this is not in their
interest. Hence, they will secure compensation sufficiently high to make the pay-off from the
fishery higher compared to the outside option. When 0