Economic decision making in salmon aquaculture : an analysis of the investment behavior for production licenses under the Norwegian traffic light system
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- Master Thesis 
The analysis of ‘The Economic Impacts of the Product Area Regulation’ by Pettersen Aubell & Haugen Hamarsland (2018) indicated a discrepancy between the calculatory willingnessto- pay for increased production capacity and the actually realized prices. This thesis will explain this paradox and provide an unprecedented view into the economic decision making of Norwegian salmon grow-out farmers in terms of long-term investment decisions (i.e. purchase of additional production capacity) in order to reduce the gap between what bioeconomic modeling suggests as ideal and actual decisions made. The detailed analysis of the Norwegian salmon aquaculture industry shows that bioeconomic modeling in aquaculture generally misses out on taking into consideration that parameters such as market prices, production costs, production technology, and environmental conditions change over time. This is anticipated by salmon grow-out farmers and included into their investment decisions. The analysis identified four main future developments that support a today’s investment into increased production capacity. Firstly, breeding programs will advance out-of-season smolts and enable salmon grow-outfarmers to release the fish flexibly all year round. This will reduce production and price cycles and stabilize the market. Second, the sea lice problem is about to be solved by lumpfish deployment. As soon as an own aquaculture is established for this species, salmon mortality can be significantly decreased. Thirdly, the climate change will increase sea-water temperatures which will improve growth conditions along the Norwegian coast, particularly in northern Norwegian regions. Fourthly and lastly, market prices have increased substantially in the last three years. As the market features an unsatisfied demand, prices are not expected to decrease in the following years and lucrative production margins support positive investment decisions for volume increases. Innovative production technologies, i.e. land-based and offshore aquaculture, represent the largest degree of uncertainty to future industry developments as their licensing is not wellelaborated, yet. Currently running under development licenses, land-based and offshore operations bear the greatest potential for growth and their future development, both technologically and license-wise, should be carefully observed.