Question 4 - Co-ops (fish example)

Autonomous fishing fleets (e.g. certain types of co-ops) are often faced with decisions on the level of effort to apply to a fishery over which they control access and catch. What follows is an example of such a decision by a community of fish harvesters - how many boats should fish the adjacent fish stock? In this example there is level of fishing activity (# of boats fishing) that will result in maximum profit for the fleet.

Assumptions:

• Profit is shared among all five boat owners
• Price of fish is $5 per pound (constant across harvest levels)
• Profit = Total Revenue - Total Cost

Questions:

1. Fill in the remaining 4 column. Must show your working and describe the logic of your analysis.
2. What is the profit maximizing number of boats that should fish this stock?
3. The number of fish caught per boat declines as effort (number of boats engaged) increases? Why do you think that will be so?
4. Explain the incentive to share profit across harvesters in this example.
5. Explain what would happen to the level of profit if entry, from outside the fleet, was permitted?

How many boats to fish?
					Total Fleet
	Monthly		Revenue	Profit	Profit	Profit
# Boats	Marginal Cost	Fish Caught	per Boat	per Boat	per Boat	per Fleet
Fishing	per Boat	per Boat (lbs)	Fishing	Fishing	Fishing	Member
1	$500	200	$	$	$	$
2	$500	190	$	$	$	$
3	$500	175	$	$	$	$
4	$500	155	$	$	$	$
5	$500	130	$	$	$	$