Optimal Vessel Quotas and Capacity of a Danish Trawler Fleet Segment: A Dual Approach

In the period of investigation, 1995–2000, the Danish fishery for species meant for human consumption was managed by individual non-transferable vessel quotas, while the fishery for species meant for fishmeal and fish oil was subject to a total quota. The revenues of the fishermen targeting species for human consumption are therefore fixed on the assumption that they are price takers, and that they will maximize profits by minimizing their costs. To model the economic behaviour of the fishermen in terms of the optimal quota size per vessel and optimal fleet size, a dual cost-function approach is an appropriate choice. This method is applied using a generalized Leontief cost function to model the behaviour of the Danish fleet of trawlers below 50 GRT, targeting species for human consumption solely. The estimated cost function is used to determine the optimal quotas yielding: (i) minimum average cost and (ii) maximum profit. The results of the estimations show that the optimal quotas per vessel should be increased by more than 2.5 times and consequently that the fleet should be reduced by more than 60%. As this has not been the case, a probable explanation is that non-transferable quotas leave the fishermen with the option of quitting the fishery only if a decommissioning programme is in place. There is no option to transfer the quota to another vessel.