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1 Volume 2, Issue 1, 2008 The Drama of the Commons. An application of Cournot-Nash Model to the Sardine in Portuguese waters. The effects of collusion José António Filipe, Assistant Professor, ISCTE Business School, Manuel A. M. Ferreira, Full Professor, ISCTE Business School, Manuel Coelho, Assistant Professor, ISEG/UTL, Abstract We study the results of collusion between two Portuguese fishing producers’ organizations (POs), with game theory. The problem is seen from a “commons” perspective, studying sardine stocks. A Cournot-Nash model is used and it evidences the benefits of collusion. Introduction Nowadays commons are a very important issue when we intend to analyze the resources on Earth. In the last decades international organisms related with commons have searched for good solutions to the exploitation of natural resources and to the environment. Hardin’s publication of “The tragedy of the commons” (Hardin, 1968) was a reference for the problems that traditionally occur in the natural resources area. The essence of the problem is that resources are over-exploited because agents want to have the maximum benefits as a consequence of a selfish human behavior. Hardin proposed several measures to preserve resources from over-exploitation. He proposed, for example, the privatization of resources or the implementation of coercive measures. We may say that it is important to implement several rules to avoid tragedies and that the collusion between agents is an important instrument to reach this aim. This means that if there is collusion (among all the agents who exploit the resource and the agents who rule or coordinate resources exploitation) the given resource is prone to be well managed, to be well regulated and to be well preserved. This will allow high prices in the market for a given resource. And, for instance, in the Portuguese sardine fisheries case, it allows high levels for fishers’ rents through low catches (or a reduced exploitation of the resource). Our paper intends to discuss the advantages of collusion and how collusion and regulation may contribute to have high levels for Portuguese sardine stocks and to have high rents for fishers. After giving an overview, to show why collusion seems to be important to bring up good results to fishing common pools, we present a Cournot-Nash model to explain the competing agents’ behavior and the role of collusion in fisheries. We can see that collusion brings up procedures that allow the preservation of species and stocks recover. After that we discuss the Portuguese sardine fishery case and we present the main conclusions. A brief characterization of Portuguese Sardine caught by POs
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This note was uploaded on 12/10/2011 for the course ECON 401 taught by Professor Burbidge,john during the Winter '08 term at Waterloo.

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