Sunk costs equal sunk boats? The effect of entry costs in a transboundary sequential fishery

Climate change is likely to result in the uncertain relocation of fish stocks. As a result new countries will emerge that compete for the resource. Although several authors have investigated this issue, most authors assume that entry is free. Although true for some fisheries, this ignores the fact that for other fisheries substantial sunk investments are needed. In this paper I investigate the effect of such sunk entry costs in a sequential fisheries. I model the uncertainty as a shock to the stock dependent fishing costs, in a two player game, where one of the players faces sunk entry costs. I find that, depending on parameters, sunk costs can i) increase the competitive pressure on the fish stock compared to a game where entry is free ii) act as a deterrence mechanism and iii) act as a commitment device. I conclude that entry costs can play a crucial role because they can change the outcome of the game substantially compared to a similar game where entry is free.