The Price Responsiveness of Salmon Supply in the Short and Long Run

Productivity growth and competitiveness indicate that salmon supplyis price responsive. However, in the short run supply is likely to be constrainedby the biological production process, regulations, and capacity constraints. Inthis article, we estimate a restricted profit function for Norwegian salmon producers,which allows us to examine the industry’s short-run and long-run supplyresponsiveness separately. Using data spanning 1985 to 2004, we find that thereis close to zero, own-price supply responsiveness in the short run. In the longrun, this changes substantially as supply becomes elastic. This result can contributeto explaining the observed cyclical profitability in the salmon farmingindustry.