Optimal Resource Management under Conditions of Uncertainty: The Case of an Ocean Fishery

The optimal management of a natural resource under stochastic conditions is analyzed in general terms and with specific application to the Eastern Pacific Yellowfin tuna fishery. Uncertainties about (1) the current future size of the resource, and (2) the market value of a resource and the cost of extracting it, exist due to variations in economic and environmental conditions. A Markov Decision Process model of the resource is developed to find optimal policies that maximize the discounted stream of expected social returns from resource use. In addition, the model is used to answer these questions: How do optimal programs for allocating resources in a deterministic environment compare with optimal programs under stochastic conditions? Do different attitudes toward social risk bearing, as regards variations in resource rents, have an effect on optimal decision rules? What is the effect of increased uncertainty about resource prices, extraction costs, and resource growth and depletion rates on optimal programs?