Effects of Rotation Scheme on Fishing Behaviour with Price Discrimination and Limited Durability: Theory and Evidence
Posted: 21 Feb 2008
Date Written: October 2004
This paper examines how rotation arrangement between two groups of Japanese fishers with different institutional arrangements affects fishing behaviour and economic outcomes in a particular economic environment characterised by price discrimination and product durability. In one group, fishers cooperate and maximise the extraction of rents, while fishers in the second group behave non-cooperatively. Except for a few months in which only the first group operates, the two groups fish on alternating days. We apply a model of alternating duopoly and examine the effects of the rotating arrangement on fishers' behaviour in the two groups. Our model shows that the cooperating group behaves like a price discriminating monopolist and tends to uphold prices. When the two groups rotate fishing days, interesting strategic interdependence arises: the cooperating group tends to produce more, which prevents the non-cooperating group from unprofitable demand pre-emption. The empirical analysis of original data confirms this result.
Keywords: price discrimination, durable goods, alternating duopoly, rotation, fisheries
JEL Classification: D23, Q22
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