The economics literature on fisheries has focused primarily on stock externalities and, to a lesser degree, on crowding externalities. Yet for many fisheries, harvesting activities may affect the underlying biological productivity of the fish stock by impacting the forage or habitat quantity or quality. We refer to this as an “ecosystem externality.” Ecosystem externalities may be positive as well as negative. While fishing may damage habitat in ways that reduce productivity, in some cases it may increase food availability and thereby increase productivity of the target species of a fishery. Extending the model of Smith (1968), we use three equations to characterize dynamics of a resource stock, profit-maximizing individual behavior, and vessel entry/exit. We use this simple model to show how ecosystem externalities, in conjunction with stock externalities and crowding externalities, affect system dynamics, open-access equilibria, and optimal fishery regulation implemented through a tax.
JEL Code: Q22, Q57.