Dept. of Economics

UNIVERSITY of ALASKA ANCHORAGEFisheries and Experimental

Economics

aka “The Beans Game”

Gunnar KnappJim Murphy

Rent Dissipation

Economic Rent• Net value from the use of a resource• Earnings or profits• = (Quantity harvested x Price received) – Cost of harvest

Dissipation• Waste by misuse, squander

Rent Dissipation• Loss of earnings due to inefficient choices• Due to the rules or policies governing the fishery

Sources of rent dissipation RENT = (Quantity harvested x Price received) – Cost of harvest

Demo #1

Resource Driven

Demo #2

Cost Driven

Demo #3

Value Driven

Demo #1 – Resource-driven rent dissipation 3 periods At the end of each period, amount in bowl 2x

• Up to capacity of the bowl Efficient outcome

• Periods 1 & 2: harvest ½ • Period 3: take it all (no future)

View results….

Tragedy of the Commons

Conditions for successful self-governance of shared resources• Hundreds of experiments• “local” fisheries can avoid tragedy,

but may also overharvest. Competitive, commercial

fisheries likely to over-harvest• Why?

Resource-driven Rent Dissipation

Elinor Ostrom2009 Nobel Prize

Rent = Quantity harvested x Price received – Cost of harvest

Overharvesting reduces biomass

Evolution of fisheries management institutions Open access / Common-pool resource

• Over-fishing Tragedy of the Commons Regulated Restricted Access (“competitive fishery”)

• Aggregate Quota (addresses CPR problem)• Vessels compete for share of Aggregate Quota

• Restricted access to fishery (harvesting permit)• Limits on use of some inputs, but not all

• Derby-style “race for fish”

Demo #2 – Cost Driven Rent Dissipation

Choose a spoon• Larger spoons cost more, but can also harvest more

What is the efficient outcome? Your results… Excessive use of inputs (“over-capitalization”)

• Race for fish or “derby” Spoons are bigger & more costly than necessary

• Getting in each other’s way, spills

Rent = Quantity harvested x Price received – Cost of harvest

Excessive use of inputs increases costs

Harvesting experiment

8 subjects per group 20 cups of beans in large bowl Revenue is $1/cup.

Subjects need to purchase “gear” to harvest the beans.• Select a measuring cup• Larger gear costs more.

Gear (measuring cups)

Scoop Size(cups)

Cost(scoops)

Cost(cups)

1/8 0.551/4 1.091/3 1.461/2 2.192/3 2.923/4 3.281 4.38

TotalPer Person 2.5 cups

Cost of your harvesting scoop is:

4.375

Amount of beans in the bowl20.0 cups

Nonlinear social dilemma payoff table

1 2 3 4 5 6 7 8 9 101 9.56 12.46 13.69 14.25 14.48 14.52 14.44 14.28 14.06 13.81 0.142 6.23 9.13 10.69 11.58 12.10 12.38 12.49 12.50 12.43 12.29 0.293 4.56 7.13 8.69 9.68 10.31 10.71 10.94 11.05 11.06 11.01 0.434 3.56 5.79 7.26 8.25 8.92 9.38 9.66 9.83 9.91 9.91 0.575 2.90 4.84 6.19 7.14 7.81 8.28 8.60 8.81 8.92 8.96 0.716 2.42 4.13 5.35 6.25 6.90 7.38 7.71 7.93 8.06 8.13 0.867 2.06 3.57 4.69 5.52 6.15 6.61 6.94 7.17 7.31 7.39 1.00

64 -0.13 -0.27 -0.42 -0.57 -0.74 -0.91 -1.09 -1.28 -1.47 -1.67 9.1465 -0.13 -0.28 -0.43 -0.59 -0.76 -0.93 -1.12 -1.31 -1.51 -1.71 9.2966 -0.14 -0.29 -0.44 -0.61 -0.78 -0.96 -1.14 -1.34 -1.54 -1.74 9.4367 -0.14 -0.30 -0.46 -0.62 -0.80 -0.98 -1.17 -1.37 -1.57 -1.78 9.5768 -0.15 -0.30 -0.47 -0.64 -0.82 -1.00 -1.20 -1.39 -1.60 -1.81 9.7169 -0.15 -0.31 -0.48 -0.65 -0.84 -1.03 -1.22 -1.42 -1.63 -1.84 9.8670 -0.16 -0.32 -0.49 -0.67 -0.85 -1.05 -1.24 -1.45 -1.66 -1.88 10.00

My Input Choice

Tota

l Inp

ut C

hoic

e of

Oth

er G

roup

Mem

bers

Average Input Choice of Other G

roup Mem

bers

Concerns about payoff tables

We don’t live in a world of payoff tables Frames how a person should think about the game A lot of numbers, hard to read Too abstract??

We’re not interested in cooperative behavior

soci

al o

ptim

um

Nas

h eq

.

Mean=4.6

05

1015

Per

cent

0 1 2 3 4 5 6 7 8Extraction Effort

(uses payoff table)CPR experiments in Colombia

20 cups of pinto beans

Pitcher on floor

Treatments

Derby• Subjects compete for a share of total harvest

Individual Quota• Subjects guaranteed a fixed share

Derby video

T1. Derby Results

Percent of beans that are spilled in Derby0

510

Per

cent

of o

bser

vatio

ns

10 20 30 40 50Percent of Beans Spilled

Mean = 27%$5.40 per period spilled(= $0.68/person)

05

1015

20P

erce

nt

-3 -2 -1 0 1 2EarningsUSD

Derby Earnings – Rents are almost fully dissipated

Mean = $0.1517% were < 0

Salmon Fishing in Bristol Bay, Alaska

Competing for limited space in the best place to catch fish—getting in each other’s way.

In Bristol Bay, although boats are restricted to 32’ in length, over time fishermen have built wider and taller boats in an effort to catch a larger share of the available fish.

Boat costs have increased without any corresponding increase in catch.

Old 32’ boat (1970s)New 32’ boat (1990s)

(Photograph by Norm Van Vactor)

Inefficient use of gear!

Sitka herring fishery

Quota video

S

Near – Far Beans Game

Experimental design . . . All subjects use the same size scoops and have no costs.

Subjects can choose between delivering to a “near” pitcher or a “far” pitcher

They get paid a higher price for beans delivered to the far pitcher

But because it takes longer they may not harvest as much if they deliver to the “far” pitcher

This subject’s

“far pitcher”

“near pitchers”

Three short video clips of the experiment

CLIP #1: A “choice” round with a low price for the “far” pitcher. Most subjects deliver to their “near” pitcher.

Note that subjects fish as they can and spill a lot of beans.

CLIP #2: A “choice” round with a high price for the “far” pitcher. Some subjects deliver to their “far” pitcher.

Note that subjects fish as they can and spill a lot of beans.

CLIP #3: A “quota” round. Most subjects deliver to the “far” pitcher.

Note that subjects fish more slowly and carefully and spill fewer beans.