Operational tools and adaptive management

When we formulate the common incentive scheme as follows; c 0 cE j,
the tax/subsidy rate
c, and the lump sum transfer c0, relate to the incentive scheme of the single principal, the
authorities, as shown in table 3.4.
Table 3.4 Changes in the incentive scheme with an additional principal
ENGOs hold higher ENV Common interests NGO hold lower ENV
and lower ECO
and higher ECO
Tax/subsidy rate c > w c = w c < w
Lump sum transfer c0 < w0 c0 = w0 c0 > w0
In some situations with two principals, the net incentive scheme, i.e. the aggregate of the two
incentive schemes, can be very strong (the aggregate of the tax/subsidy rates has a high
absolute value) compared to what one principal would have forwarded as the single principal.
This is the case when one principal has very asymmetrically weighted interests, i.e. either
nearly only environmental interests, or nearly only economic and social interests, whereas the
other principal‟s interests are more symmetric. Then, to avoid the strong tax/subsidy rate
forwarded by the “asymmetric” principal, the “symmetric” principal may propose to
cooperate and forward a common incentive scheme. As will be shown below, a common
incentive scheme will almost always give a lower tax/subsidy rate when compared to the
aggregate of two separately fixed rates. Hence, by cooperating, the “symmetric” principal
tries to discipline the “asymmetric” principal.
The scenario “NGO hold lower ENV and higher ECO” may seem strange, all the time we
consider environmental NGOs. However, the organisation “Kystens Venner” (Friends of the
Coast) calls themselves environmental. However, as they see the fisheries as the most
important industry along the coast, they will often hold stronger economic than environmental
interests, at least towards some fisheries‟ activity, arguing that it is important to keep the
fisheries alive. There are examples of corresponding organisations in other European
countries, as Friends of the Sea (France?).
3.2.3.2 Symmetric stakeholders “compete” in regulating the fishery activity
There is also the possibility that the two principals, authorities and ENGO, do not cooperate
and instead develop two separate incentive schemes. Denote the two schemes t 0 t1E
j for
the authorities, and 0 1E
j for the ENGO respectively. The agent, i.e. the fishers, reacts
only to the net incentive scheme, which is the aggregate of the two schemes.
One can argue that the ENGOs will have mainly environmental interests, but there are
examples of ENGOs which also take into consideration the social and economic impacts the
fishery activity has on local communities. We start off by assuming that the two principals are
symmetric in the sense that they hold the same interests towards the fishery under
consideration, and that they separately and simultaneously derive an incentive scheme in
order to affect the fishers‟ behaviour with regard to choice of effort, and thus harvest. In
formulating their incentive schemes, both take into account the fact that another principal
formulates an incentive scheme towards the same agent. Taking into account this strategic
interaction the tax/subsidy rate set by one principal becomes a function of the tax/subsidy rate
set by the other principal. Interdependent tax/subsidy rates are also called reaction functions,
and a reaction function gives one principal‟s best reply to the tax/subsidy rate of the other
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