{"id":1467,"date":"2023-10-21T16:37:27","date_gmt":"2023-10-21T20:37:27","guid":{"rendered":"https:\/\/pressbooks.bccampus.ca\/ewemodel\/?post_type=chapter&p=1467"},"modified":"2024-09-24T20:43:07","modified_gmt":"2024-09-25T00:43:07","slug":"tutorial-price-elasticity","status":"publish","type":"chapter","link":"https:\/\/pressbooks.bccampus.ca\/ewemodel\/chapter\/tutorial-price-elasticity\/","title":{"raw":"Tutorial: Price elasticity","rendered":"Tutorial: Price elasticity"},"content":{"raw":"We will, once again return to Anchovy Bay where anchovy are caught by seiners and bait boats, In spite of the name of the second fleet, the anchovy from both fleets are primarily used for human consumption. The bait boats land high-quality anchovy, and have a secondary market supplying anchovy for recreational fisheries and a lobster trap fishery (not in the model). \u00a0Because of the high quality, the bait boats average \u20ac3\/kg for anchovy, which is more than the \u20ac2\/kg that seiners command. Anchovy is popular as a tasty, healthy and economic fish to buy in the fresh fish supply. But there is a limit to how much can be sold as there are no exports, so it's only the local markets that have demand. The implication of this is that the price for anchovy is impacted by supply, which we can introduce in the model through price elasticity.\r\n\r\nWe can use any version of the Anchovy Bay model that you may have or you can download it from this x<\/a>.\r\n\r\nOpen the model, go to Ecosim and do a run (Ecosim > Output > Run Ecosim > Run<\/i>), check the model output to acquaint yourself with the model.\r\n\r\nNext, let's change the model slightly so that we can get more anchovy from it. Go to Ecosim < Input < Fishing effort,<\/em> click on\u00a0Trawlers<\/em> at the lower panel, and then Set to value,\u00a0<\/em>enter 5 to increase trawler effort five times throughout the Ecosim run. Do the same for Seiners<\/em>, also five times increase. This change is to fish out whiting and mackerel, the major predators on anchovy to allow for a build-up of anchovy that can sustain a higher fishing pressure. Run Ecosim (Ecosim > Output > Run Ecosim > Run<\/em>), see Figure 1.\r\n\r\n\"\"\r\n\r\nFigure 1. Ecosim run with five times increase in effort for Seiners and Bait boats. Notice how the anchovy biomass initially declines, then increases beyond the baseline in spite of higher fishing pressure. This shows predator release.\u00a0<\/strong>\r\n\r\nNext, go to Ecosim > Output > Ecosim results<\/em> > Group landed by:<\/em> and extract the anchovy catches and values for Seiners<\/em> and Bait boats<\/em>. \u00a0Store these values for later.\r\n\r\nOpen the Ecosim > Input > Price elasticity<\/em> form, and Add<\/em> a shape. If you've worked with Mediation<\/em>, you may notice that the setup is very similar (though the shapes are green \u2013 the colour of money, some say), and programmatically the price elasticity form is indeed derived straight from the Mediation<\/em> form. \u00a0Click\u00a0Change shape<\/em> set Shape type<\/em> to Linear<\/em> and set Start<\/em> to 1 and End<\/em> to 0.1. Hopefully, you'll now have a shape like in Figure 2.\r\n\r\n\"\"\r\n\r\nFigure 2. Price elasticity shape defined on the Ecosim > Input > Price elasticity<\/em> form.\u00a0<\/strong>\r\n\r\nIn the Figure 2 shape, note that there is a vertical stippled blue line. That line sets where on the figure the Ecopath baseline situation is. That is, when the landings are at that level the landing price(s) will be the same as entered in the Ecopath baseline (\u20ac2\/kg and \u20ac3\/kg, for anchovy landed by seiners and bait boats, respectively). \u00a0The default placement of the vertical blue line is at \u2153 of the X-axis, and in this example the value there is 0.7 x the max value. If landings increase 3 times, the Y-axis value will be reduced to the minimum value of 0.1, and it will remain for any higher catch level. Does that seem reasonable = what you want? If not, you can use your mouse to move the vertical blue line to the left or right as you see fit. Just remember that the vertical line represents your baseline and ask what will happen if catches change.\r\n\r\nThe linear shape in Figure 2 is an approximation that is not data-driven, but a quick and easy way to explore the impact of price elasticity. You could dive and perhaps find data \u2013 do that for a real application.[footnote]For a real application, you could develop a function to describe price elasticity from data and implement that function in, e.g., Excel or R. Make your x-axis (landings) with 1200 steps, and copy\/paste those to the spreadsheet under Values<\/em> on the Price elasticity<\/em> form. Such data exists! see for instance Parente J, V Henriques & A. Campos. 2021. The anchovy fishery by the Portuguese coastal seine fleet - landings and fleet characteristics. DOI:10.1201\/9781003216599-76<\/a> where there's a relationship between sale price of anchovy and anchovy landings[\/footnote]\r\n\r\nWe now have a shape, but need to define what it represents. Click\u00a0Define supply<\/em> on the\u00a0Price elasticity\u00a0<\/em>form and the\u00a0Define supply<\/em> form pops up (Figure 3).\r\n\r\n\"\"\r\n\r\nFigure 3. Define supply<\/em> form for price elasticity. Under\u00a0Seiners<\/em> click Anchovy<\/em> and then\u00a0the arrow-right button to transfer Seiners > Anchovy<\/em> to the Assigned landings<\/em>. Press OK<\/em>.<\/strong>\r\n\r\nAssign the Seiners > Anchovy<\/em> landings to drive the price elasticity from as shown in Figure 3. Note that the relative weight is the unit landing price for the group. This is of relevance where you have more than one group driving the price elasticity. In that case \u00a0the default assumption is that the overall measure of landing capacity if a function of the value of each of the groups being landed. \u00a0That's an assumption, replace it with data, where possible (if not, it's a reasonable default assumption).\r\n\r\nNext we need to apply the function, this is done at the Ecosim > Input > Price elasticity > Apply price elasticity form<\/em>, see Figure 4. Follow the instructions in the figure legend.\r\n\r\n\"\"\r\n\r\nFigure 4. Apply price elasticity<\/em> form. One by one, click the intersection between Seiners<\/em> or Bait boats<\/em> vs.<\/em> Anchovy<\/em>,\u00a0<\/em>and on the pop-up form use the right-arrow to apply the functions, and press OK<\/em>. The figure shows the second of intersections (Baits boats<\/em> and Anchovy<\/em>) being applied. Once completed, there should be $1 (for first price elasticity function) for anchovy for boat fleets.\u00a0<\/strong>\r\n\r\nNotice that it is the landings of anchovy from the seiners fleet that drives the price elasticity function, but that the impact of this is being used for anchovy from both the seiners and the bait boats. Is that logical? Perhaps not, but the bulk of the catch come from the seiners, and bait boat delivers a high quality specialty product. But the main purpose of this is really just to demonstrate that it possible to have landing prices for one fleet being a function of another fleet's landings \u2013 think for instance about the potential case of surimi production impacting pricing for king crab<\/a>.\r\n\r\nYou should now have the complete setup of price elasticity for the Anchovy Bay model. When you run economic routines, e.g., the value chain or policy optimization, the landing price of anchovy will be a function of the landings. But here, we'll simply extract the value of the landings from a standard Ecosim run.\r\n\r\nRun the Ecosim model again (Ecosim > Output > Run Ecosim > Run<\/em>), and you'll hopefully find that the run looks exactly like it did the first time we ran Ecosim in this tutorial (similar to Figure 1). That's because price elasticity only changes the value of the landings in this case, so the runs are identical. If you instead were doing policy optimizations with value as an objective, the runs, i.e. the optimum would be different.\r\n\r\nAgain, extract the anchovy catches and values from the Ecosim results form (Ecosim > Output > Ecosim results<\/em> > Group landed by:<\/em>).\r\n