Exvessel Price Determination in the Alaska King Crab Fishery: A Formula Price Contract under Uncertainty?

Abstract

Commercial fisheries industry structure often suggests exvessel price formation occurs in the context of a competitive harvesting sector and an oligopsonistic processing sector. However, industry conduct leading to a determination of exvessel price can be notably at odds with this inference. This paper presents empirical evidence that the conduct of at least one such fishery, the Alaska king crab industry, may emulate bilateral monopoly. Exvessel price determination is consistent with an implicit formula price contract in which fishers behave as monopolists through bargaining associations, while processors behave as countervailing monopsonists, even in the absence of explicit collusion. Both sectors appear to behave in a manner consistent with joint expected profit maximization, with profit shares apportioned via the implicit formula price contract. This price formation process simplifies empirical analysis of the bilateral monopoly conduct by avoiding complicated game theoretic/bargaining models.