Optimal vessel size and output in the Australian northern prawn fishery: a restricted profit function approach

Individual transferable quotas (ITQs) are to be introduced into Australia’s Northern Prawn fishery in the near future. Total allowable catches (TACs) are to be set with the objective of maximising economic efficiency in the fishery. Under ITQs, vessel owners have the ability to adjust their fishing activities to maximise profits and changes in fleet structure resulting from management changes need to be considered when determining TACs. A restricted profit function for the fishery was estimated to determine the optimal vessel characteristics and output levels as a guide to how the fleet may adjust under an ITQ system. Vessels were found to be currently close to their optimal size given average historic prices and current stock conditions. However, higher tiger prawn stocks are expected to result in the average size of vessels increasing, with rising fuel prices also likely to result in capital being substituted for fishing days. Optimal average vessel-level catches of the main species are lower than current average vessel catches for a wide range of input and output prices. These changes in vessel characteristics and behaviour need to be incorporated in the derivation of the optimal TACs if economic efficiency objectives are to be achieved.