Regulation of aquaculture production

In this paper, we investigate the economically optimal regulation of aquaculture production. The time between releasing and harvesting fish (rotation time) from a pond is an important decision variable for an aquaculture producer, and we use rotation time as a regulatory variable. By using a general model as a starting point, we construct a basic model for a private and social optimum assuming an infinite time horizon. The quality of fish is explicitly included in our basic model, and we show that a total tax scheme, collected at the end of each rotation, equal to the total discounted damage costs secures a social optimum. We also discuss the implications of several modeling extensions for our regulatory recommendations, but we require that the extensions can be captured within the general model. Examples of modeling extensions include differences between socially and privately fixed costs and discount rates.