In this chapter we model the investment decisions of fishermen, under various management conditions. This study, which extends the results of Chapter 2, is necessary in order to understand the phenomenon of overcapacity, now widely considered to be a major obstacle to sustainable fisheries management. For example, Gréboval and Munro (1999), quoting P. Mace, state that “The key problem afflicting marine capture fishery resources … is overcapacity …. Over the two decades 1970–1990, world industrial fisheries harvesting capacity grew at a rate eight times greater than the rate of growth of landings from world capture fisheries.” And, according to Hilborn (2002) “Overfishing is primarily a symptom of overcapitalization and fisheries management systems that do not work.” Many other similar statements could be cited.

At least three questions arise from these perceptions:

1. Why has overcapacity occurred?

2. In what ways is overcapacity undesirable?

3. How should overcapacity be dealt with?

Governments have already spent hundreds of millions of US dollars attempting to reduce excess capacity in fisheries by means of buy-back programs. Whether these programs have been successful in achieving their objectives is questionable, to say the least. In a detailed empirical study of buy-back programs, Holland et al. (1999) stated that most buy-back programs had failed, and that “… the potential for buy-back programs to achieve the … goals that they are typically meant to address seem [sic] very limited.”