The northern prawn fishery has been subject to management since the early 1970s in an attempt to control the expansion of effort and prevent the overexploitation of the resource. Many of the management policies developed over this period have proved to be ineffective in controlling effort. Moreover, the increasing cost of management and the need to avoid costly and ineffective measures will lead to increasing demands for analysis of the cost effectiveness of such policies. In order to assess the effects of current and alternative management policies on both effort and profitability in the fishery, a mathematical programming model of the fishery was developed in the Bureau's Fisheries Economics Research Section. This report outlines the model and assesses the short and long term effects of the current and alternative management policies on the fishery.

The East Coast Prawn Fishery extends along the east coast of Australia from Torres Straight in the north to Barrenjoey Point in New South Wales. A limited entry policy was recently introduced to the fishery and a task force comprising industry and government representatives is currently deliberating on the direction of a long-term management strategy.

In theory, the common property nature of commercial ocean fisheries implies that they will eventually become economically overexploited. A previous survey by the Bureau of Agricultural Economics has indicated that returns to capital employed in the fishery were negative, indicating that economic overexploitation has in fact occurred. Scientific evidence suggests that there is no biological threat to the prawn stock, given present levels of exploitation. Economic overexploitation has resulted from the increase in fleet size and capacity which took place in the 1970s and can be regarded as resulting from 'boat crowding' externalities.

The preferred management strategy will be that which maximises the net benefits to society, where net benefits are defined as economic returns less management costs. A technique using mathematical modelling and simulation is suggested for the estimation of net benefits from alternative management policies. Such a method will allow management policies to be ranked on their economic merits and show the distributional consequences within the fishery of each alternative.