Monopsony Processing in an Open-Access Fishery

In a recent paper, Clark and Munro (1980)showed that monopsony processing more than offsets the effects of open-access in the harvesting sector of a commercial fishery, and leads to overconservation of the resource. We show here that this conclusion depends critically on the cost of capacity and consequent ease of entry and exit from the harvesting sector. In particular, for low entry and exit speeds the monopsonist has a high degree of monopoly power and bydepressing the price overconserves the natural resource relative to the social optimum, while as the adjustment speed approaches infinity a monopsonist employing a discount rate equal to the social rate of discount will be induced to behaveoptimally from the viewpoint of society. By means of a simulation employing parameters from the Pacific halibut fishery, we also show that a monopsonist subject to relatively sluggish entry or exit may reap profits considerably less than the resourcerents accruing if the resource were optimally managed.