Patterns in the relative price for different sizes of fish : biological price generating processes in fish farming

Abstract

Fish farming is a biological production process dependent upon biological and environmental conditions. These constraints imply that fish farmers are likely to have a quite similar distribution of different sizes of fish over time. If there are no perfect substitutes for the different sizes of fish in the short-run, this production cycle can cause different relative prices between the different sizes over the year. By studying prices for different sizes of salmon for the period 1992-1998 we show that such relationship exist. This can have important implications when studying aquaculture industries and markets. We look closer at two issues – optimal harvesting decisions and aggregation. Optimal harvest models generally assume this relationship to be constant, and may therefore give incorrect recommendations. Patterns in the relative prices may also make it questionable whether one can aggregate the different sizes into one product.