Are Two Rents Better than None? When Monopoly Harvester Co-ops are Preferred to a Rent Dissipated Resource Sector

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.

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 Record created 2017-04-01, last modified 2018-01-22

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