Discrete modelling of supply response under uncertainty: The case of the fishery

In the absence of complete control in a regulated industry, effective management requires prediction of firms' behavioral responses to public policy. This paper develops a discrete choice model of supply response under uncertainty and applies it to fishery choice problems of New England fishing firms. While fishermen demonstrate a bias towards remaining within the same fishery, sufficient incentives, in terms of changes in expected returns and risk, are shown to elicit response. Due to extreme uncertainty concerning population dynamics of fish stocks, a satisficing approach to management, facilitated by this type of modelling, may be more appropriate than bioeconomic optimization.