Journal
WATER ECONOMICS AND POLICY
Volume 3, Issue 2, Pages -Publisher
WORLD SCIENTIFIC PUBL CO PTE LTD
DOI: 10.1142/S2382624X16500156
Keywords
Salmon; aquaculture; disease management; market power; strategic behavior; multi-nationals; industrial organization; infectious salmon anemia
Categories
Funding
- Swedish Research Council Formas
- European Community's Marie Sklodowska-Curie International Incoming Fellowship
- STRATECHPOL - Strategic Clean Technology Policies for Climate Change
- EC [PIIF-GA-2013-623783]
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We develop a model of a multi-national firm producing commodities for a global market in multiple locations with location-specific risks and different regulatory standards. Salmon aquaculture and disease outbreaks provide an empirically relevant example. We specifically examine details of the infectious salmon anemia outbreak in Chile in the late 2000s, the multi-national nature of some firms operating in Chile, and the overall market structure of the salmon farming industry as motivation for our theoretical model. In the model, market structure and the regulatory environments in multiple countries interact to influence how intensively firms use aquatic ecosystems. Downward-sloping market demand can lead to a perverse outcome in which high environmental standards in one country both lower the provision of disease management in the other country and reduce industry-wide output. We extend this model to consider additional locations, types of firms, and within-location risk spillovers. We find that the risk of outbreak in a given location is decreasing with greater firm concentration within the location, increasing with the outside production of operators within the location, and increasing with lower risk (or more regulation) in other locations where the operators produce. We suggest other applications of multi-national risk management.
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