Frederick W. Bell

Technological Externalities and Common-Property Resources: An Empirical Study of the U.S. Northern Lobster Fishery

This paper demonstrates the effect of technological externalities on the production of northern lobsters, a common-property resource. An increase in effort (that is, size of the industry) of 100,000 traps fished will depress landings per trap for the individual firm by 2.4 pounds. Therefore, the northern lobster industry produces so as to equate average revenue to long-run average cost. Approximately one-half of the present fishing effort would be needed to achieve economic efficiency or marginal cost pricing. The goal of allocative efficiency should be weighed against the strategy to provide somewhat greater employment, especially in rural areas where labor opportunity cost is relatively low.