Investment Decision Making by Fishermen

Abstract

Individual fishermen make investment decisions in an environment which is competitive and highly variable from season to season. Extensive variability means that economic survival must be a primary consideration in the investment decision process. In this paper, fishermen's investment decisions are modelled as a probabilistic dynamic programming problem in discrete time. Fishermen are assumed to make rational decisions based on income expectations and subject to survivability conditions to maximize the net worth of the fishing enterprise at the end of a finite planning horizon. The formal analysis of the investment model is presented and the model is applied to trailer fishermen of the British Columbia commercial fishing fleet. The results present an accurate picture of actual investment decisions and provide valuable insights into the behavioral basis of investment decision making by fishermen. Understanding the investment decisions of fishermen has implications for planning and regulation in fisheries: insights gained into the key factors provide the basis for the development of strategic long-term policies that anticipate fishermen's behavior. The consequences will be a movement away from reactive, short-term policies which have characterized fisheries regulation to date.