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1 March 2009 “Option Value of Harvesting” Revisited
SUDIPTO SARKAR
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Abstract

This article corrects an internal inconsistency in Li's (1998) model of the option value of fishery harvesting. In that model, the harvesting effort was related to the fish stock at harvest by the Gordon-Schaefer average sustainable yield model. However, when deriving the option value, the harvesting effort and fish stock at harvest were treated as unrelated to each other. I show that, when this inconsistency is rectified, the option value is smaller, and as a result the optimal harvest trigger is lower (or moves closer). Further, the optimal harvest trigger becomes less sensitive to the degree of uncertainty regarding the evolution of the fish biomass.

JEL Classification Codes: Q22, C61

SUDIPTO SARKAR "“Option Value of Harvesting” Revisited," Marine Resource Economics 24(1), 77-81, (1 March 2009). https://doi.org/10.5950/0738-1360-24.1.77
Published: 1 March 2009
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KEYWORDS
Fishery harvesting
optimal trigger
real option
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