Cournot Oligopoly in Commercial Fisheries

This paper analyzes commercial fisheries through the lens of a Cournot oligopoly model to explain persistent overfishing under open access conditions. This paper models fishers as profit-maximizing firms that compete for harvest quantities, resulting in the exploitation of a shared, renewable fish stock. The examination finds that while firms internalize price effects, they often ignore stock externalities that result in aggregate harvest levels that surpass the social optimum. As the number of firms increases, conversely, total catch grows monotonically. This leads to accelerated stock depletion and the dissipation of resource rents. Incorporating biological stock dynamics, works to reveal that Cournot equilibria are not only inefficient but can be ecologically unstable, which increases the risk of long-run fishery collapse. Free entry further worsens the outcome, effectively by driving profits to zero while increasing total effort. This paper finds that through institutional interventions, specifically individual transferable quotas (ITQs) and limited entry movements, effectively work to internalize externalities, change firms’ best response functions, and move equilibria toward sustainable harvest levels and higher long-run welfare.