Are Two Rents Better than None? When Monopoly Harvester Co-ops are Preferred to a Rent Dissipated Resource Sector Dale T. Manning1 Colorado State University
[email protected] Hirotsugu Uchida2 University of Rhode Island
[email protected] Draft May 10, 2014 Selected Paper prepared for presentation at the Agricultural & Applied Economics Association’s 2014 AAEA Annual Meeting, Minneapolis, MN, July 27-29, 2014. Copyright 2014 by D.T. Manning and H. Uchida. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies. 1 Assistant professor, Department of Agricultural and Resource Economics, Colorado State University,
[email protected]. 2 Assistant professor, Department of Environmental and Natural Resource Economics, University of Rhode Island,
[email protected]. Abstract This paper evaluates the conditions under which a fish-harvester cooperative (co-op) with monopoly power represents a preferable outcome when compared to a rent dissipated fishery. Currently, United States anti-trust law prevents harvesters from coordinating to restrict output. In a fishery, this coordination can represent an improvement, despite the creation of market power because a monopolist builds the resource stock. We show, analytically, how a monopolist harvester co-op generates both resource and monopoly rent. While the monopolist generates monopoly rent by restricting production to generate higher prices, it also manages the fish stock to lower stock dependent harvesting costs. We demonstrate the conditions under which a monopoly is likely to be favored over rent dissipation. Given that a monopoly can be efficiency- improving in a common property resource sector, policymakers should consider both the costs and benefits of co-op formation in the case of a rent dissipated fishery.