FISHERY BULLETIN: VOL. 73, NO. 1 



It is also possible that in some cases there may 

 be no changes in both Ex and Ey that will benefit 

 both countries. If both countries adopt a local op- 

 timum regulation policy, the PRI's will be of the 

 general shape of those depicted in Figure 5b. In 

 this case, there have to be mutual reductions in 

 order for either country to gain, but as pictured 

 here, there are no mutual reductions that will 

 benefit both countries. 



If the governments have the power to control the 

 level of effort in their countries, then it is possible 

 for both of them to increase their welfare by each 

 agreeing to a change in the property right dis- 

 tribution such that the new combination lies 

 within the area described. And further gains are 

 possible if the PRI's for the countries are not 

 tangent at the new point. In other words, given 

 that the equations for the PRI's are of the form 

 Wpfi = Wpfi (Pi?;^,P/?y), further gains are possible 

 unless 



(15) 



dPR^ 



dPR, 



that is, unless the slopes of the PRI curves are 

 equal. Formally this says that the ratio of the 

 change in welfare in country X due to a change in 

 property rights in country X and to a change in 

 rights in country Y must be equal to the ratio of 

 the change in welfare in country Y due to a change 

 in rights in country X and in country Y. This can 

 be rewritten in terms of the earlier notation as: 



dFr 



+ 



dM, 



Ui ^E, U2 dE 



dFy 



Ul dE, 



(15') 



U,' 



dEy 



rjy aFv , rry dM 



a^v 



dEy 



The change in welfare in either country due to a 

 change in its allowable effort is equal to the 

 change in welfare due to a change in F times the 

 change in F due to a change in allowable effort 

 plus the change in welfare due to a change in M 

 times the amount of M that must be given up to 

 produce the extra allowable effort. The change in 

 welfare in the other country is simply the change 

 in welfare due to a change inF times the change in 

 F due to a change in allowable effort in the first 

 country. 



Where the final trading position will be and 

 hence what the exact gain to each country is can- 



not be accurately determined in advance. It de- 

 pends however upon the international free market 

 equilibrium distribution of the property rights to 

 the fishery which determine the position of the 

 PRI's, the trading ability of the two countries, the 

 extent of the knowledge concerning each other's 

 PRI's, and the number and particular composition 

 of any small trades that lead up the final equilib- 

 rium. It would be possible to construct off'er curves 

 from the PRI's similar to the ones used in interna- 

 tional trade theory, but since trade in mutual 

 changes in property rights will necessitate inter- 

 governmental negotiations and since they will, 

 more than likely, take place on a lump-sum basis, 

 the equilibrium determined by their intersection 

 would be of doubtful significance. 



To summarize this discussion let us consider 

 point J in Figure 5a, which is one possible final 

 trading position. Notice that it is not possible to 

 redistribute the property rights from that point 

 v^dthout forcing one of the countries to suffer a loss 

 in welfare; that is, there are no further changes in 

 the distribution of the property rights that will be 

 mutually beneficial. This is one of the conditions 

 that must hold for an MEY of an international 

 fishery. It determines the amount of fish that 

 should be caught and the distribution of the rights 

 to catch it. An important point to remember how- 

 ever is that this condition vdll not guarantee that 

 the fish are caught at the lowest possible cost, and 

 yet this is a very important aspect of MEY. 



Let us now consider the potential for mutual 

 gains from trade in actual property rights or in 

 fishing effort. Such trade is not possible unless the 

 rights to fish have been formalized either at the 

 open-access equilibrium or at some other mutu- 

 ally agreed upon point. Again it should be remem- 

 bered that this is only one type of trade, and the 

 degree to which each country is willing to engage 

 in it depends to some extent upon the makeup of 

 the other trades. 



Just because a country has the right to fish does 

 not mean that it should necessarily produce the 

 effort to catch the fish. For instance, if the oppor- 

 tunity cost of producing effort is cheaper inX, then 

 both countries can gain if X expands the produc- 

 tion of effort and then sells the increase to Y, who 

 must make a corresponding reduction in its pro- 

 duction of effort. If the price of effort for these 

 international sales is between that in each coun- 

 try, both will be able to gain. Country X will gain 

 because it is getting more for the effort that it cost 

 to produce. Country Y will gain because it can buy 



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