Evaluating Profit Efficiency of the South Australian Rock Lobster Fishery: Nerlovian and Directional Distance Function Approach

Efficiency analysis in fisheries is not uncommon. In the past, efficiency analysis has mainly focused on productivity, cost and revenue, with relatively few investigating profit efficiency. Negative profits and small sample sizes in fisheries have been some of the obstacles diverting attention from this direction. We consider a new approach in the context of fisheries to overcome these challenges and examine profit efficiency in the rock lobster fisheries of South Australia. Specifically, we apply Nerlovian and Directional Distance Function methods to decompose profit efficiency of the rock lobster fishery into technical and allocative efficiencies. We use meta-frontier efficiency techniques to compare the Northern and Southern zone rock lobster fisheries. Results show that profit inefficiency in the South Australian rock lobster fishery can be largely attributed to allocative inefficiency. Results also show significant variability between efficiency levels in the Northern and Southern zones.