Modeling Participation and Bids in the Northeast U.S. Groundfish Fishing Vessel Buyout Program

Abstract

An experimental buyout program was initiated in 1995 to remove fishing vessels from the Northeast United States groundfish fishery. Implemented as a reverse auction, the purpose of the pilot program was to determine the level of interest in a vessel buyout and to gain insight on the prices owners would be willing to accept to surrender their vessel and all associated fishing permits. Of the 296 eligible vessels, the pilot program drew 114 applicants with average bids of $455 thousand. Information provided by the applicants was used to evaluate the likely participation and potential cost of an expanded buyout. This paper describes the pilot buyout program and the econometric procedures used to forecast probability of participation and bids, and to estimate the number and types of vessels that could be purchased at various levels of program spending. The decision of whether to participate in the program and the magnitude of bids were modeled in two stages via the specification of a participation function and a bid function. Alternative methods for modeling these functions, such as the Tobit model and the Heckman and Cragg two stage models, are discussed. Variables found to explain participation and bids include total and groundfish revenue history, allocated days-at-sea in the groundfish fishery, gear type, expected ranking, and vessel size characteristics. The expanded buyout program, completed in April 1998, provides a unique opportunity to evaluate the accuracy of the forecasts. (Click here for paper)

Source: Kitts, A., Thunberg, E., and J. Robertson. 1998. “Modeling participation and bids in the Northeast U.S. groundfish fishing vessel buyout program.” In: A. Eide and T. Vassdal, eds., Proceedings of the Ninth Biennial Conference of the International Institute of Fisheries Economics & Trade, July 8-11, Tromso, Norway. Tromso, Norway: Norwegian College of Fishery Science.

For more information, please contact: Andrew.Kitts@noaa.gov