The Option Price of Recreational Bag Limits and the Value of Harvest

Abstract

Daily harvest limits are a common form of regulation in consumptive recreation. We show that angler willingness to pay for a bag limit change is an option price and show how it relates to the value of harvest changes. Specifically, if expected utility theory holds, then option prices for one-fish bag limit increments along with catch distributions can be used to “recover” the compensating surplus (CS) for harvest increments. We also show that further assumptions (e.g., risk neutrality) are necessary to recover the CS for harvest from option prices for larger bag limit increments. We demonstrate our method using a choice experiment and catch data for Gulf of Mexico anglers. This work gives analysts a way to adapt the information at hand to the policy question. For example, when CS estimates are needed for an ex post analysis, but only option prices are available, our work shows how to obtain the required CS information.