Rent Dissipation in Chartered Recreational Fishing: Inside the Black Box



charter or headboat in the fishery.29 Note that the rationale for this instrument is not the same as
that underlying the entry tax in the classic, single-input fisheries literature. This explanation has
its root in the tendency of vessels in open access conditions to apply “effort” beyond the point
that maximizes long-run resource rents. The other taxes in (29) account for analogous forms of
this behavior in a multidimensional sense. The tax on entry in the current case is necessitated by
a form of rent dissipation that arises due to the lack of cross-firm coordination in entry behavior
under an external capacity constraint (the number of available fishing days). Without such a tax,
there will likely be an excess burden of fixed costs in the industry.

Although the conditions in (29) may suggest the necessity of imposing Q+4 corrective
instruments to achieve optimal management, such is not the case. The analysis of the prior
section foreshadowed this by demonstrating that the complex distortions in catch quality inputs
have their common origin in the fact that the competitive value of catch effectiveness reflected to
vessel owners is excessive under open access.

Consider the outcome of an open access for-hire market, but with corrective taxes on
landings, discards (both administered on a per-angler basis) and the number of vessels
30:

D*

max       {MB (D, H (X, q (zq, N )), L, S ( z,, N ))-τbL - тl ( H () - L )} dD

D*, L, N, NV ,z 0                                                                              (30)

- Nv * c(Zq, Zs, N, NumTrips, w, r) - τNv Nv

where the constraints in (7) are once again imposed. It is a simple exercise in algebraic
substitution to demonstrate that each of the implicit tax conditions in (29) is satisfied (so that the

29 The revenues from this instrument could be redistributed in a non-distortionary way back to industry or used to
fund fishery research. Furthermore, this tax can achieve the safe effect on entry incentives if it is levied on only the
marginal entrant into the fishery (so that this entrant is indifferent between participating or not) - a method that may
enjoy significant practical advantages over wide-scale recapturing of rents.

30 We assume in (30) that anglers bear the direct incidence of landings and discard fees while the tax on vessels falls
upon vessel owners. Given the assumption of our theoretical model, alternative allocations will achieve the optimal
equilibrium as well. The following section relaxes this unrealistic view and considers the question of how the target
of the tax may alter outcomes.

26



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