Cost sharing and catch sharing

• Published in: Journal of development economics Vol. 58; no. 1; pp. 25 - 44
• Main Author: Matthiasson, Thorolfur
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01-02-1999; Elsevier; North-Holland Pub. Co; Elsevier Sequoia S.A
• Series: Journal of Development Economics
• Subjects: Compensation; Cost analysis; Cost sharing; Costs; Development economics; Economic models; Economic theory; Fishing; Fishing industry; Fishing vessels; Iceland; Modelling; Remuneration systems; Risk; Studies; Iceland; Remuneration systems; Q22; J33; Fishing; D33; Cost sharing
• ISSN: 0304-3878; 1872-6089
• DOI: 10.1016/S0304-3878(98)00101-1

The model developed in this paper attempts to provide an explanation of the fact that Icelandic vessel owners and Icelandic skippers do not share costs of operation of a vessel. In the model, a skipper is contracted to take a fishing vessel to the fishing ground. The skipper is remunerated with a share of the catch, subject to an agreed minimum. Skippers and vessel owners are modelled as if risk-neutral. Skippers develop a fishing strategy which is more costly, the higher the value of the potential catch associated with that strategy. Costs that accrue are partly pecuniary (and shareable) and partly skipper-specific (and non-shareable). The conclusions of the paper demonstrate that given the assumptions of our model, a vessel owner should prefer a remuneration contract with a positive revenue share and zero cost share.