Economic Analysis Evaluates Effects of Catch Limits on Bottomfish Market Prices and Consumer Demand

Fishery management decisions, like setting levels of total allowable catch (TAC), can have important consequences for fish markets and consumers. Using recent advances in methodology, PIFSC economists Justin Hospital and Minling Pan have analyzed the market demand for Hawaii bottomfish. The purpose of the research is to provide fishery managers with relevant economic information they can consider when making decisions about the bottomfish TAC.

The research introduced a generalized inverse demand system and details market linkages between various fish species in the Hawaii bottomfish market. The analysis used State of Hawaii monthly commercial fisheries data from 1996 to 2006, derived from the State of Hawaii Fisher Reporting System and State of Hawaii Dealer Database. The demand system for the analysis is a subset of the total Hawaii seafood market, and its definition is limited to zone-specific domestic bottomfish in the main Hawaiian Islands (MHI) and Northwestern Hawaiian Islands (NWHI), domestic reef fish, and imports of fresh snapper and grouper. Of particular interest to the analysis are the 'Deep 7' bottomfish species.

Changes in MHI 'Deep 7' TAC levels affect both prices and revenues generated by individual species, groups of species, and market competitors to local bottomfish. Hospital and Pan found all bottomfish species in the demand system to be substitutes in the marketplace, so that reductions in TAC levels for MHI 'Deep 7' species would be expected to translate to increased demand for other domestic species. This could have the unintended consequence of increased prices and fishing pressure for non-regulated species. Thus it would be prudent to closely monitor biological indicators for non-regulated and substitute species.

Demand for MHI 'Deep 7' bottomfish varies seasonally due to social and cultural factors, and managers should consider such patterns when adopting seasonal regulatory measures. Specifically, December is the month of peak demand, and an absence of domestic 'Deep 7' bottomfish during this month would have profound economic and cultural implications. Likewise, short-run macro-economic considerations, such as changes in tourist arrivals, inherently play a role in bottomfish demand and price formation.

Change in economic "welfare" generated by changes in MHI Bottomfish TAC level as predicted by the Differential Generalized Inverse Demand System Model.
TAC level
(1,000 pounds)
TAC level
% change
Welfare Change
95% Confidence Limits
Lower Upper
2410no changen/an/an/a

As prices change with changes in supply or demand, consumers change their buying habits and hence their overall satisfaction. Economists term this change in satisfaction a "welfare" change, which has nothing to do with social welfare programs but is a monetized estimate of consumer satisfaction. The accompanying table presents estimated changes in welfare to consumers associated with changes in MHI 'Deep 7' TAC levels. The welfare change values are in terms of inflation-adjusted 2008 dollars and the percentage TAC changes are relative to the 2009 'Deep 7' TAC level of 241,000 pounds.

Recent influxes of imported fresh snapper and grouper may be distorting traditional demand and supply relationships within the Hawaii bottomfish fishery. The research also estimated the level of substitutability between imports and domestic bottomfish. Hospital and Pan found that imports are substitutable with domestic bottomfish, which means that declines in domestic bottomfish catches will increase demand for fresh snapper and grouper imports.

Predicted changes in bottomfish price ($/lb) associated with increases or decreases in MHI 'Deep 7' Total Allowable Catch (TAC) levels, all other factors constant.

Bottomfish prices decline with increases in the MHI 'Deep 7' TAC levels, all else held constant. However, Hospital and Pan found evidence of elastic prices for domestic bottomfish, on average, meaning that prices are not very responsive to increases or decreases in quantity. Prices for a given fish species or group of species are more responsive to changes in the quantity of that species or group, as evident in the steeper slope for MHI 'Deep 7' prices. As most species were found to be substitutes in the marketplace, declines in MHI 'Deep 7' TAC levels will lead to increased demand and prices for non-regulated species, which may alter fisher behavior.