More landings for higher profit? Inverse demand analysis of the bluefin tuna auction price in Japan and economic incentives in global bluefin tuna fisheries management

Abstract

This paper estimates the price changes in global bluefin tuna (BFT) markets in response to shifts in regional and global landings to evaluate the conservation and economic incentives from changes in the Total Allowable Catch (TAC) managed by all three Regional Fisheries Management Organizations. A fisherman's income, and thus the financial incentive to accept management measures controlling catch levels, depends in part on how responsive price is to overall catch. Individual fisherman, with their own best interest in mind, used to wish to increase their individual landings and create an incentive to ask to increase the TAC for the industry, without realizing the possible revenue loss due to the resulting falling prices. To protect the value of all stakeholders' property rights, a consensus to avoid abruptly raising the TAC, without first considering the potential loss due to market response, is needed. Alternatively, if revenue increases with lower TAC, a positive economic incentive for conservation is created if price increasing proportionately more than the lower supply, with harvest profits boosted by lower costs of production. To capture the complexity of substituting across various sources of supply and product form, a general synthetic inverse demand system is estimated to identify the impact of overall landings on BFT prices. This system estimates price flexibilities of both fresh and frozen longline-caught sashimi-grade tunas (Pacific, Atlantic and southern bluefins, and bigeye) at the Tokyo Center Market in Japan, including the Tsukiji Market, the world's largest fish auction market that served as the single global price leader for BFT. The resulting estimation shows that own-quantity price flexibilities of every type of fresh and frozen BFTs are less than unity and inflexible in their own consumption. This creates poor individual producer incentives for fishermen to reduce wild or farmed BFT supply, as there is a chance to increase their own revenue, under the unlikely condition that the total supply is fixed. However, by observing the rapid increases in the TAC of Eastern Atlantic bluefin tuna (EABFT) in the coming years, suppliers may not be better off as price will drop proportionally faster and total revenue if the estimated scale flexibility is greater than one. Based on the estimated scale flexibility of frozen BFT, which is slightly less than unity, the frozen subsector of EABFT suppliers is the only winner under the supply increases. Suppliers of frozen BFT in other regions, fresh BFT (in the Atlantic and elsewhere), and southern BFT and bigeye tuna will all be harmed through lower revenue by the supply increases. Additionally, while total revenue might stay the same for frozen BFT suppliers, fishermen will potentially receive lower profits due to higher operating costs associated with increased landings when the supply of EABFT increases. Given the number of sectors that ultimately lose financially in the short term and given the ecological (and production) risks accompanying an abrupt increase in fishing pressure in the long term, the global economic losses resulting from an increase in the allowable catch of Atlantic bluefin tuna will outweigh any potential increases to revenue.