Uncertainty in Fisheries Economics: The Role of the Discount Rate

Standard models of management of a single-species fishery generally assume that the biomass is of known size and that it is generated by a well-specified deterministicgrowth law. In reality the biomass is of uncertain size and usually subject to random growth. Several authors have addressed the problem of random growth assuming a known initial biomass and have shown that lowering the planning discount rate proportional to the variance is an optimal planning procedure assuming small perturbations. In this paper we assume that the growth function is nonrandom but dependent upon a biomass stock of unknown size. We shall show that a planner should raise the discount raterelative to the certainty equivalent case by an amount related to society's distaste for risk in order to manage the biomass optimally over time. As is to be expected, the optimal steady-state biomass will be less than would occur in a situation of certainty.