Fisheries Management under Irreversible Investment: Does Stochasticity Matter?

We present a continuous, nonlinear, stochastic, and dynamic model for capital investment in the exploitation of a renewable resource. Both the resource stock and capital are treated as state variables. The resource owner controls fishing effort and the investment rate in an optimal way. Biological stock growth and the capital depreciation rate are stochastic in the model. We find that the stochastic resource should be managed conservatively The capital utilization rate is found to be a nonincreasing function of stochasticity. Investment could be either higher or lower depending on the interaction between capital and the resource stock In general, a stochastic capital depreciation rate has no strong influence on optimal management. In the long run, the optimal harvest for a stochastic resource becomes lower than the deterministic level.