The Price Responsiveness of Salmon Supply in the Short and Long Run

Productivity growth and competitiveness indicate that salmon supply is price responsive. However, in the short run supply is likely to be constrained by the biological production process, regulations, and capacity constraints. In this article, we estimate a restricted profit function for Norwegian salmon producers, which allows us to examine the industry's short-run and long-run supply responsiveness separately. Using data spanning 1985 to 2004, we find that there is close to zero, own-price supply responsiveness in the short run. In the long run, this changes substantially as supply becomes elastic. This result call contribute to explaining the observed cyclical profitability in the salmon farming industry.