Regime switching in a fishery with stochastic stock and price [An article from: Journal of Environmental Economics and Management]

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Description:
A bioeconomic model of a fishery subject to stock uncertainty and price uncertainty is developed. With a linear control model, the optimal harvest policy is a bang-bang approach to the optimal stock level, where one harvests either at minimum or full capacity. It is assumed that changing the harvest rate is subject to a switching cost. In this case it is shown that there are two switching curves in stock-price space, one for entering and one for leaving the fishery. Numerical methods are used to characterise the optimal switching policy for the fishery.