FISHERY BULLETIN: VOL. 73, NO. 2 



(independent) variables on the endogenous 

 (dependent) variables price and quantity. A 

 general application of this methodology to any 

 commodity would specify that quantity supplied 

 (Qs) is dependent on input cost factors, prices of 

 goods related in supply, and price of the product. 

 Quantity demand (Q^ is usually hypothesized to 

 depend on current price, income, and prices of 

 related goods in demand. 



When specifying such a model for oyster 

 markets several modifications to the supply 

 specification of the above general framework are 

 employed. Although from supply theory input 

 factors include technological, environmental, and 

 biological variables, data limitations restrict the 

 inclusion to a single biological factor, the MSX 

 disease." It is hypothesized that the protozoan 

 oyster parasite commonly referred to as the MSX 

 disease has a negative impact on the oyster in- 

 dustry during the period of analysis. Also since no 

 strong relationships between the production of 

 oysters and other goods is readily apparent, we 

 omit prices of related goods from the oyster supply 

 relationship. 



The last modification of the supply relationship 

 for oysters and probably the most unique feature 

 of the model is the hypothesis that quantity 

 supplied is a function of price lagged 1 yr rather 

 than current price. As in the case of agricultural 

 commodities, quantity supplied of oysters can be 

 considered a function of past price and natural 

 phenomena and hence fixed in the short run. In the 

 fishery case a fixed supply is usually based on the 

 presence of lags in generating fishing effort (e.g. 

 securing capital and making occupational choices). 

 Lagged price can be expected to positively 

 influence current fishing effort.'^ In fishery es- 

 timation with annual data however, the assump- 

 tion of such long lags in adjusting fishing effort 

 may be inappropriate and the inclusion of lagged 



"Little technological change has occurred during the period of 

 analysis due in part to state regulation mandating old tech- 

 nologies as a conservation device. Environmental factors such as 

 pollution and siltation have doubtless had a negative impact on 

 oyster supplies, but unfortunately little systematic and consis- 

 tent information is available through time. 



'^e note that although lagged price may positively affect 

 current effort the total effect on current harvest (i.e. supply) 

 depends on what effect lagged price has on the current biological 

 stock of the resource. For reasons explained below the net affect 

 of lagged price on current supply might actually be negative if 

 stocks have been reduced to tne point of depletion. For an 

 example of the short-run supply assumption (i.e., supply is 

 independent of current price) in the fishery area, see Bell (1968). 

 It should be noted that Bell's empirical work is quite successful 

 using monthly data. 



price as a determinant of effort will likely be a 

 weak determinant of supply. 



An additional rationale is therefore necessary 

 for including price lagged 1 yr as a determinant of 

 supply. We hypothesize that lagged price has a 

 negative impact on current supply due to a deple- 

 tion effect. In fishery production not only current 

 effort, but current biological stock determines 

 current production. If current biological stock is 

 negatively related to past effort, then variables 

 explaining past effort may bear a strong relation 

 to current supply. Price lagged 1 yr (or alterna- 

 tively distributed lags of past prices if data were 

 plentiful) may be closely related to past effort. 

 Accordingly we hypothesize that price lagged 1 yr 

 is a proxy for past levels of effort and thus nega- 

 tively related to current biological stock. Also if 

 the negative relationship that lagged price has on 

 current biological stock is strong enough to offset 

 the positive relationship lagged price has on 

 current fishing effort, the net impact of lagged 

 price on current supply might be negative. 



Furthermore we expect the negative depletion 

 effect of lagged price to be stronger in fisheries 

 subject to common property. Thus lagged price is 

 likely to have a slight positive effect on supply in 

 fisheries subject to private property due to the 

 positive effort effect. For fisheries subject to 

 common property the negative depletion effect is 

 expected to offset the positive effort effect yield- 

 ing a negative relationship between lagged price 

 and quantity supplied. 



The structural equations and equilibrium condi- 

 tion of the fixed supply model applied to oyster 

 markets are written below with expected 

 parameter signs appearing above each explana- 

 tory variable. 



-1- 



SupplyQ, = S(MSX,P,.i) 



Demand Q^ = D, (P, I, P,) 



Equilibrium conditions Q, = Qd = Q 



where MSX, Pf .i, P, I, and P^ are the MSX disease, 

 price lagged 1 yr, current price, income, and the 

 price of a related good, respectively. In the supply 

 equation a negative relationship with MSX is 

 hypothesized a priori, and lagged price may be 

 positive or negative depending on the intensity of 

 depletion. In demand, current price is expected to 

 have a negative effect according to the law of 



258 



