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Systems modelling and bioeconomic modelling in

aquaculture
a
Oscar J. Cacho
a
Department of Agricultural And Resource Economics , University of New England ,
Armidale, NSW, 2351, Australia Fax:
Published online: 13 Nov 2008.

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Economics & Management, 1:1-2, 45-64, DOI: 10.1080/13657309709380202

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 Systems modelling and bioeconomic modelling in
aquaculture
OSCAR J. CACHO
Department of Agricultural And Resource Economics, University of New England, Armidale, NSW 2351, Australia
Downloaded by [Universidad Autonoma Metropolitana] at 10:55 16 March 2015
Abstract
This paper reviews current and potential applications
of systems models and bioeconomic models in aquacul-
ture. Basic information on alternative types of models
and the process of model design and implementation is
presented. A simple optimal control model, applied to
harvesting and feeding decisions, is used to illustrate
the numerical solution of dynamic optimization prob-
lems. The dynamic programming version of the prob-
lem is also presented and the advantages of each
approach are discussed. The paper concludes with a
discussion of future prospects. An overly mathematical
language is avoided and emphasis is placed on practical
solution techniques.
Keywords: bioeconomics, dynamic programming,
optimal control, systems modelling
Introduction
All research involves models, whether formal or infor-
mal. Formal models are expressed in mathematical or
statistical terms; while informal models might be noth-
ing more than an abstract idea or a verbal description of
a system or phenomenon. Although aquaculture has
been practised for centuries in some parts of the world,
its status as a discipline using scientific enquiry is rela-
tively recent. As with other disciplines, aquaculture has
evolved from a verbally descriptive approach to the
more precise language afforded by mathematical and
statistical models. Traditionally, most formal models
used in aquacultural research have been linear, based
on the principles of statistical inference, analysis of vari-
Correspondence DrO.J. Cacho, Department of Agricultural
& Resource Economics, Armidale, NSW 2351, Australia.
Fax:61-67-73-3281.
© 1997BlackweIl Science Ltd
ance and regression. More recently, nonlinear dynamic
system models and bioeconomic models are being used.
Formal models may take a variety of different forms,
from spreadsheet models to complex iterative models
described by sets of differential equations and imple-
mented using programming languages. In many
respects, the use of simulation models can be seen sim-
ply as an extension of the general use of models to con-
ceptualize and state hypotheses (Bywater & Cacho
1994). However, simulation models offer a range of
opportunities not normally associated with other types
of models. This paper reviews the use of models in aqua-
culture, focusing on system models in general and bioe-
conomic models in particular. The paper also presents
information on model building and use which might be
useful to those interested in learning more about the
field. In developing models for aquaculture, we have
much to learn from work done by agricultural scien-
tists and fishery economists and their work will be
briefly reviewed.
Models can be used for a number of different pur-
poses in research and management of production sys-
tems. Some possible uses are:
• integration of existing data and concepts;
• identification of gaps in research;
• screening of potential experiments;
• generation and testing of hypotheses;
• deduction of unmeasurable parameters;
• interpretation and evaluation of experimental
results;
• design of efficient production systems;
• determination of best operating conditions for a
given production system;
• evaluation of policy.
Aquaculture Economics
Most of these uses are mentioned by Bywater & Cacho & Management
(1994) in the context of agricultural production, but Volume 1, Number 1
they apply to aquaculture as well. Obviously a single 1997
model cannot be used for all purposes. An all-encom- pp45-64
45
 46 Systems modelling and bioeconomic modelling in aquaculture • O.J.Cacho
passing model runs the risk of becoming as complex as
the real system, defeating the purpose of the model as a
simplified representation of reality. As explained later,
the intended use of a model must be borne in mind in
the initial stages of model design and development.
This paper starts by discussing types of models
according to alternative classification criteria, it then
defines the concepts of systems and bioeconomic mod-
elling and reviews the current status of bioeconomic
modelling in aquaculture. A detailed description of the
model building process is then presented, followed by a
simple example which illustrates the application of opti-
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mal control theory to an aquacultural enterprise. Finally
a discussion of future prospects for the field is presented.
Types of models
Models can be classified according to different criteria,
depending on the phenomenon or system they describe
and the manner in which they are defined, implemented
and used. This section discusses the types of models
which can be produced by different types of research
and describes several possible model classifications.
Figure 1 (adapted fromBywater& Cacho 1994) pre-
sents the relationships between different types of
research and the entities modelled in an aquacultural
context. Biological research is represented as a box con-
taining two possible approaches, based on whether the
research focuses on particular components of a system
or on the system as a whole. Component research is
concerned with the understanding of the mode of
action or behaviour of components of a production sys-
tem and its subsystems, such as tissue and cellular com-
ponents, as well as research at the whole animal and
plant level. In contrast, systems research is aimed at
characterizing interactions that occur between compo-
nents at the production system level. Although the dis-
tinction between the two is somewhat arbitrary, the
main difference is that systems research tends to use
'systems approaches' while component research uses
'reductionist approaches' (Bywater&Cacho 1994).
Management research, which is outside of the realm
of biological research, uses the results of systems
research to quantify the effect of different system organi-
zations and interventions on system output, so as to
achieve better or best results. Results may be measured
in terms of physical performance, financial returns and
Aquaculture Economics
& Management
risk in different environments. The objective of manage-
ment research is not so much to understand why some-
Volume 1, Number 1
1997 thing happens, as to utilize the best understanding avail-
pp 45-64 able for management purposes (Bywater & Cacho 1994).
Farming systems research (FSR) uses a systems
approach to integrate information from physical, bio-
logical and social sciences. FSR places emphasis on the
farmer, not only as a decision maker, but also as a
'social being' who is part of a community and has goals
other than profit maximization.
Bioeconomic modelling is not explicitly represented
in Fig. 1, as it can fit in different compartments depend-
ing on the context in which it is applied. Bioeconomic
modelling can be viewed as a particular form of man-
agement research or as a component within a whole
FSR framework.
In general, formal models can be classified under dif-
ferent criteria, depending on their level of complexity
(simplistic and holistic), how model equations are
derived (mechanistic and empirical), how time is treated
(static and dynamic), whether random events are
allowed (determinstic and stochastic), and whether opti-
mizing behaviour is assumed (positive and normative).
Each of these classifications is briefly discussed below.
- Simplistic vs. holistic
As suggested earlier, all models are simplified represen-
tations of reality and, as such, they must contain sim-
plifying assumptions. Simplistic models are more con-
strained in terms of their limiting assumptions; they are
represented by one or a few equations and are designed
to be solved analytically. In contrast, holistic models
attempt to describe a system in detail and often cannot
be solved analytically. Component models can be sim-
plistic or holistic, while systems models are holistic by
definition, as they describe detailed interactions.
Management
research
Fanning
systems
research
Fig. 1 Relationship between different types of research and
the types of models produced.
© 1997BlackweU Science Ltd
 O.J.Cacho • Systems modelling and bioeconomic modelling in aquaculture
Clark (1985) argues that simplistic modelling corre-
sponds to 'open' scientific investigation with assump-
tions, deductions and conclusions available to
scrutiny, leading to the formulation of general theories.
Simplistic modelling often requires familiarity with
advanced mathematical techniques. In contrast, holis-
tic modelling is more of a 'closed' investigation, in
which outsiders must rely on the assumptions, expla-
nations and conclusions supplied by the model
builders. A holistic model is possible only with the help
of a computer, which allows the analyst to experiment
in ways that would not be possible with the real system.
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Holistic modelling might not demand the same mathe-
matical expertise required by simple models, as model
equations are solved numerically.
Empirical vs. mechanistic
According to France & Thornley (1984), an empirical
model aims to predict, while a mechanistic model
attempts to describe. Empirical models follow the so
called 'black box' approach, where the interest is to
obtain output based on given inputs, with no regard for
the process by which such output was produced. Mech-
anistic models, in contrast, represent a mathematical
description of the actual process being modelled.
It is always possible to find an empirical model that
gives a better fit to a given dataset than a mechanistic
model. This is because the empirical model has fewer
constraints, whereas the mechanistic model can be
considerably constrained by its assumptions (France &
Thornley 1984). Empirical models often use polyno-
mial functions which can be fitted to any degree, allow-
ing as many turning points in the data to be mimicked
as desired. However, the applicability of empirical mod-
els is constrained to conditions similar to those in
which the data were collected. Mechanistic models are
more general and can be applied to a wider range of
conditions.
Notice that the definition of empirical models used
by economists differs from that presented above. In eco-
nomics an empirical model is one which is applied to
real world data, as opposed to a theoretical model.
Static vs. dynamic
Static models do not contain time as a variable. Many
econometric models and models implemented on
spreadsheets are of this type. Static models generally
simulate equilibrium conditions. When a system is dis-
turbed, a static model may predict what the new equi-
librium will be, but does not say anything about the
path of adjustment or the length of time required for
adjustment to take place. In contrast a dynamic model
© 1997Blackwell Science Ltd
47
includes time explicitly and it uses differential or differ-
ence equations to describe the change in the system
variables through time. A dynamic model can be used
to describe paths (and the length) of adjustment when
an equilibrium is disturbed, or it can predict whether a
new equilibrium will be reached at all.
Deterministic vs. stochastic
Deterministic models can be used to predict expected
values for the system and ignore the possibility of vari-
ability. Stochastic models contain random elements or
probability distributions, reflecting the uncertainty in
the real world. A deterministic model represents a vari-
able by its most likely value, a stochastic model repre-
sents variables as probability distributions.
It is common practice to start by building and solv-
ing a deterministic model, to ensure that the model out-
put is satisfactory. Once confidence in the model is
achieved, stochastic behaviour can be added; this is
generally done by allowing the environment (e.g. tem-
perature; rainfall) to vary according to given probabil-
ity distributions. In stochastic economic models it is
also common to allow prices to vary randomly.
Another common way of including stochastic
behaviour in growth models is by attaching a probabil-
ity distribution to the growth potential of the plant or
animal population.
Positive vs. normative
Economic models can be classified according to
whether they are descriptive (positive) or optimizing
(normative). A normative model gives the decision
maker information describing the courses of action
that will lead to the optimization of a particular crite-
rion. Positive models simply indicate what outcomes
will result from alternative decisions. Normative mod-
els are usually much more expensive to operate than
positive models. According to Manetsch (1978) the
cost of operating a nonoptimizing model increases in
direct proportion with the size of the model (as mea-
sured by the number of variables in the model). The
cost of operating an optimizing model, however, tends
to increase much faster than the model size.
Systems modelling
The central idea in systems modelling is that a system
Aquaculture Economics
contains components which interact with each other & Management
over-time, and that such interaction is a primary Volume 1, Number 1
determinant of system behaviour (Bywater 1990). 1997
Strictly speaking, a spreadsheet budgeting model is not pp45-64
 48 Systems modelling and bioeconomic modelling in aquaculture • O.J.Cacho
a system model, because the response of the system is
exogenously determined and depends on the practical
experience of the person developing the model. A
requirement for a formal system model is that the
reponse be endogenously determined by interactions
between components.
The systems modelling approach 'internalizes' more
variables (as state variables) rather than treating them
as exogenous or ignoring them altogether as a spread-
sheet budgeting model would tend to do. This approach
is thus advantageous in analysing natural resource
management problems (Van der Ploeg et al. 1987).
Resource management models are highly relevant to
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some forms of aquaculture, such as salmon, oyster, and
mussel aquaculture, and other enterprises which com-
pete with recreational uses or affect the aesthetic value
of the environment. Solutions to these problems will
become increasingly important as regulatory con-
straints are put in place by government.
Systems models are often too complex to be used as
management tools by producers and extension agents.
In this regard, Bywater (1990) points out that compre-
hensive systems models can be used to identify and
select the key factors to be included in more aggregate
management models (summary models) for specific
applications. Summary models can contain only ele-
ments identified as essential. An advantage of this
approach, as pointed out by Bywater (1990), is that
summary or re-aggregated models generally provide
more accurate predictions over a wider range of cir-
cumstances than empirically derived models at a simi-
lar level of aggregation.
This paper focuses on bioeconomic applications,
and does not present an exhaustive review of stand-
alone system models (with no economic components).
Examples of complex system models in aquaculture
include those of Cuenco et al. (1985a,b,c) dealing with
fish bioenergetics and growth; Wolfe et al. (1986) on a
solar algae pond ecosystem; Piedrahita (19 8 8) on mod-
elling of pond ecosystems, and Hagiwara & Mitsch
(1994) who model a carp polyculture system.
Bioeconomic modelling
Generally speaking, a bioeconomic model consists of a
biological model, which describes the production sys-
tem, and an economic model, which relates the produc-
Aquaculture Economics
& Management tion system to market prices and resource constraints.
Volume 1, Number 1
However, the term bioeconomics means different things
1997 to different people depending on their discipline and
pp 45-64 particular area of interest. Allen et al. (1984) define
bioeconomics as 'the use of mathematical models to
relate the biological performance of a production sys-
tem to its economic and technical constraints'. Van der
Ploeg et al. (1987) use the term alternatively to refer to
'the biological foundation of economic activity', simply
as 'extending microeconomic concepts to biology', or
'the idea of maximizing net economic yield while main-
taining sustainable yield'. Clark (1985) defines it as
'the interrelations between the economic forces affect-
ing the fishing industry and the biological factors that
determine the production and supply offish in the sea'.
A bioeconomic model can be a systems model that
includes economic components or a multiequation
model with a single biological equation. The logistic
equation and the Beverton-Holt recruitment model are
commonly used to capture the essential features of pop-
ulation dynamics in fishery and forestry models.
According to Van der Ploeg et al. (1987) bioeco-
nomics refers primarily to economic research using
optimal control theory and models of population
dynamics of exploited species. Despite the common
emphasis on dynamic models, bioeconomic modelling
techniques can also contibute in other areas. A bioeco-
nomic model can be used as the basis for budget genera-
tors (Adams et al. 1980) and information from budgets
can be used to obtain coefficients for mathematical pro-
gramming models. Stochastic bioeconomic models can
provide estimates of the range of values of selected vari-
ables, which can in turn be used for mathematical pro-
gramming models with stochastic elements (such as
target MOTAD) or stochastic dominance studies. Bioe-
conomic models can also be used to generate data for
production function estimation (Cacho et al. 1990), to
help design and evaluate production facilities (Allen &
Johnston 1976) and to determine research priorities
(Bosch &Shabman 1990).
Figure 2 (based on Cacho 1993) presents a general
framework for a fish-farm model. Here, hexagonal
boxes represent submodels, rectangles are model vari-
ables and ellipses represent exogenously determined
variables. Arrows represent the flow of energy, matter
or information between compartments. Each level,
along with its 'local' variables is enclosed within a
shaded box to emphasize that it is viewed as a self-con-
tained unit in the development process.
The biological model
For convenience, the production system is represented
at three levels of aggregation, the individual fish, the
pond and the whole farm; each level dealing with differ-
ent types of interactions. This is a convenient represen-
tation because it allows the model developer to focus on
© 1997BlackwelI Science Ltd

r
* * f \ faeration,
[feedingstrategy) [biomass] I wale rexchange!
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Fig. 2 A general conceptual model for a fish-farm
bioeconomic model.
a given portion of the problem without being over-
whelmed by details of events occurring at another
level.
The individual fish growth model is mostly con-
cerned with the influence of the physical environment
(temperature and water quality), the dietary environ-
ment (food intake and diet quality) and the status of the
individual fish (body weight and composition) on the
productive potential of the system. Notice that model
components at this level not only affect growth rate
directly, but also interact with each other in complex
ways. In particular, food intake (perhaps the most
important input) interacts with both water quality and
diet quality and is affected by fish weight and body com-
position. Also notice that, depending on the level of
detail being modelled, each box in this diagram (Fig. 2)
could represent a composite of several variables. For
instance, water quality could represent dissolved oxy-
gen (DO), or a combination of DO, ammonia, chemical
oxygen demand (COD) and other relevant variables.
The pond management model is concerned with the
effect of pond management decisions on a fish popula-
tion and its environment. Stocking and harvesting
decisions affect the actual biomass in the pond, while
feeding, aeration and water exchange strategies affect
the carrying capacity of the pond and the potential
growth rate of fish. The diagram (Fig. 2) presents no
interactions between pond-level variables; decision
variables translate into fish-level environmental vari-
ables, which interact with each other as detailed above.
This is an oversimplification of the dynamics of a pond
© 1997BlackwelI Science Ltd
O.J. Cacho • Systems modelling and bioeconomic modelling in aquaculture 49
ecosystem. Factors such a phytoplankton populations,
phosphate concentration, solar radiation and wind can
have considerable effects on the ecosystem dynamics.
The variables presented in this conceptual model, how-
ever, emphasize the nature of a pond as a decision mak-
ing unit, rather than as an ecosystem.
At the whole farm level, a group of ponds is related
to resource availability, cash flow and environmental
constraints. Water discharges from individual ponds
and cash flow resulting from harvesting activities are
)
fed back into the farm management model, which looks
at the 'big picture'. At the farm level, the allocation of
resources through time must be determined to meet
whatever objectives are set in the economic model.
Examples of decisions taken at the farm level include
those regarding water treatment before discharge (if
regulatory restrictions apply), the use of water for other
enterprises (crops), or the establishment of rotational
stock-harvest strategies to even out cash flow through-
out the year.
The economic model
Once implemented, a biological model can be 'attached'
to different types of economic models. The economic
model can be designed to interact with the biological
model at a given level of aggregation, depending on the
problem being analysed (see Fig. 2). An economic
model provides the link between the market and the
production system. It can be viewed as an 'outer layer'
which controls the operation of the biological model for
its own purposes. Control is achieved through model
inputs and feedback is obtained as outputs. If the eco-
nomic model is an iterative optimization model, the
input-output cycle may occur thousands of times, with
the inputs being adjusted in response to outputs until
an optimal solution is obtained. If, on the other hand,
the economic model is a simple positive model, say a
budget generator, each input-output cycle might pro-
duce a complete table of results containing the appro-
priate enterprise budget.
Obviously, a dynamic biological model is ideally
suited as the base of a dynamic optimization economic
model. Fisheries economists have contributed consid-
erably to the development of dynamic bioeconomic
models (Clark & Munro 1975; Clark 1976, 1985;
Munro & Scott 1985). Clark & Munro (1975) called
attention to the importance of explicitly accounting for
time in fishery economic models and present an intro-
ductory treatment of optimal control theory. Their Aquaculture Economics
& Management
paper starts with a simple linear problem, followed by
Volume 1, Number 1
the more complex nonlinear case. Clark (1976,1985) 1997
has been influential in stimulating the application of pp 45-64
 50 Systems modelling and bioeconomic modelling in aquaculture • O.J. Cacho
optimal control and capital theoretical concepts to fish-
ery management problems, and Clark (1976) provides
an amenable introduction to the techniques of optimal
control as applied to fishery management. Chaudhuri
(1988) used optimal control theory to optimize the
combined harvesting of two competing species of fish.
These sources deal with simple mathematical popula-
tion models, which are solved analytically and provide
good insights into the nature of dynamic optimization,
but they do not provide information on techniques for
the numerical solution of complex dynamic problems.
As mentioned earlier, although emphasis is often
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placed on dynamic models, not all bioeconomic models
are dynamic. The review that follows discusses exam-
ples of both static and dynamic models.
Review of past work in bioeconomics
Table 1 presents a chronological review of bioeconomic
models applied to aquaculture. This list is by no means
exhaustive but rather presents, at a glance, the main
trends in thefieldover the last 20 years.
In general, it appears that the most popular species
for modelling are shrimp, prawn and salmon. Different
combinations of single equation and complex nonlin-
ear biological models have been used, with the Von-
Bertalanffy equation being popular for simple models.
In terms of the optimization techniques used, optimal
control and dynamic programming feature promi-
nently, although budgeting, mathematical program-
ming, nonoptimizing simulation and comparative stat-
ics also occur. The most common decision variables are
the time and rates of harvesting and stocking. Other
decision variables are environment (temperature) or
water quality (DO, salinity, water recirculation).
Although the importance of feeding rates is mentioned
in many papers, surprisingly few include feeding as a
decision variable. Other decision variables deal with
facility design, research priorities and policy variables.
The most common objectives are profit maximization
and the analysis of research priorities. A brief descrip-
tion of the papers follows.
Botsford et al. (1974) and Allen & Johnston (1976)
are two instances of several papers on lobster aquacul-
ture written by this group of scientists. The former
paper applies optimal control theory to the design and
operation of a lobster aquaculture facility, while the
Aquaculture Economics
& Management
latter illustrates a positive approach, where the response
Volume 1, Number 1
of costs to changes in parameters and design variables
1997 is described. Both papers emphasize the problem of
pp 45-64 designing an aquaculture facility for a high-value
species, whose culture has not been technically devel-
oped to be economically viable. The capability for a pri-
ori evaluation of technology illustrated in these papers,
represents an important application of bioeconomic
modelling.
Adams etal. (1980), Griffin etal. (1981) andKarpef
al. (1986) present shrimp models of different degrees of
sophistication, spawned from studies at Texas A & M
University. Adams et al. (1980) use budget simulation
analysis to study economies of size in shrimp produc-
tion. They study the effect of both pond size and farm
size on production costs. Griffin et al. (1981) introduce
a more complete environmental model, include
stochastic behaviour and use a market model to deter-
mine potential profits. These authors study the effects
on yield, cost, revenue and profit of stocking and har-
vest date, temperature, salinity and dissolved oxygen.
They present the probability distribution for profits
obtained through stochastic experiments using differ-
ent combinations of decision variables. Karp et al.
(1986)usean optimal control model to determine opti-
mal harvest and restocking times and levels. They pre-
sent and solve a determinstic optimal control model,
followed by a stochastic problem which they solve by
dynamic programming. Their results assess the value
of information (in a stochastic environment) and con-
trol over the environment.
The prawn and shrimp models developed at the Uni-
versity of Hawaii focus on stocking and harvesting
decisions. Leung (1986) and Leung & Shang (1989)
present a dynamic programming model of prawn pro-
duction. The biological (population) model consists of a
Markov process which updates the size distribution of
prawns every two weeks, while the economic model
determines optimal partial stocking/harvesting deci-
sions. Leung et al. (1989) and Hochman et al. (1990)
present a stochastic dynamic shrimp model. They use
the growing inventory approach to determine optimal
harvest-stocking decisions. Leung et al. (1993) present
a methodological comparison between their prawn
and shrimp models.
The models developed at Auburn University focus
on nutritional responses and are applied to catfish pro-
duction, an important species in the south-eastern
United States. Cacho et al. (1990) illustrate the use of
bioeconomics to link the static analysis of traditional
production economics to the analysis of nutritional
experimental results. The authors discuss the effects of
diet quantity and quality on profitability and crop
length. Cacho et al. (1991) present an optimal control
model designed to determine the optimal feeding trajec-
tory of a catfish pond under a cyclical temperature
© 1997BlackwelI Science Ltd
 Table 1 A chronological sample of published research in bieconomics of aquaculture
a.
o Optimization/analysis
ienc<5 Ltd

Author(s) Species Biological model technique Decision variables Objectives

Botsford etal. (1974) lobster mechanistic/empirical optimal control temperature, space. minimize cost
nonlinear system recirculation, feeding facility design
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Allen & Johnston (1976) lobster as above budgeting plant size, target weight. research priorities, facility design
temperature, recirculation
Adams etal. (1980) shrimp Von-Bertalanffy budgeting pond size. study economies of size
number of ponds
Griffin eta/. (1981) shrimp multiequation/multicompartment stochastic experiments stock, harvest, DO, identify study areas critical to profitability
temperature, salinity
Talpaz&Tsur(1982) carp Von-Bertalanffy, Gompertz optimal control harvest, stock density. maximize profit
water flow
Anderson (1985) salmon Beverton-Holt optimal control harvest, recruitment maximize profit (rancher and fishermen)
Karp etal. (1986) shrimp Von-Bertalanffy optimal control. stock, harvest maximize profit
dynamic programming
Leung (1986),
Leung & Shang (1989) prawn Markov process (size distribution) dynamic programming stock, harvest maximize profit
Bjomdal (1988) salmon. Beverton-Holt recruitment. comparative statics harvest maximize profit
turbot cubic polynomial growth
Bola&Satter(1989) prawn population/system dynamics linear programming partial harvest maximize profit
Leung etal. (1989),
Hochman etal. (1990) shrimp log-reciprocal growth (empirical) dynamic programming stock, harvest maximize profit
Bosch &Shabman (1990) oyster exponential function of simulation research priorities improve risk efficiency
environmental factors (empirical)
Cacho etal. (1990) catfish bioenergetic model static optimization feed quality and quantity. explore bioeconomic relationships D.
crop length
Cacho etal. (1991) catfish bioenergetic model optimal control feeding rate minimize cost
Sylvia & Anderson (1993) salmon simple rate constants multilevel modelling various policy variables evaluate policy alternatives
Hean (1994) salmon Beverton-Holt recruitment, static optimization stocking density. maximize profit
cubic polynomial growth harvest time
Logan etal. (1995) sturgeon spline growth-age. simulation plant size, stocking density. analyse cost, revenues and
logistic mortality marketing age return on investment
Part on & Nissapa (1995) seabass. Cobb-Douglass goal programming Aquaculture production meet income, employment and
tiger prawn levels, fishing effort water quality goals
 52 Systems modelling and bioeconomic modelling in aquaculture • O.J.Cacho
regime. They calculate 'dynamically optimal' iso-
quants to illustrate the trade-off between diet quantity
and quality.
Other papers based on optimal control theory
include those of Talpaz & Tsur (1982) and Anderson
(1985). Talpaz & Tsur (1982) present a model for par-
tial harvesting in a common-carp/cotton operation in
Israel, and determine optimal water flow and initial
stocking density. Anderson (1985) bases his compara-
tive dynamics analysis on optimal control theory. He
studies the interaction between salmon ranching and
open accessfisheries,presents different policy scenarios
and concludes that co-operative management of both
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aquaculture and commercial fishing can be profitable
for both groups.
Bjorndal (1988) presents a comparative statics ana-
lysis of the effects of discount rates, harvesting costs and
feed costs on optimal harvest date. He provides exam-
ples of optimal harvesting for salmon and turbot, using
a fitted third degree polynomial to simulate fish growth,
with time as the independent variable. Bjorndal's work
was followed up by other authors, including Hean
(1994) who presents an analysis of the optimal number
of recruits to stock and the optimal harvesting time, as
affected by stocking, harvesting and feeding costs. She
applies her analysis to an empirical model of salmon
aquaculture in Tasmania.
Arnason (1992) bases his analysis on that of Bjorn-
dal, introducing dynamic behaviour and presenting a
general comparative dynamics analysis. Heaps (1993)
extends the model of Arnason by including feeding rate
as a decision variable.
Bala & Satter (1989) present a model of prawn pro-
duction which incorporates a population dynamics
model and a linear programming model. The popula-
tion model provides input to the linear programming
(LP) model which in turns determines an optimal har-
vesting schedule. The nature of the link between the
dynamic model and the LP model is not made clear in
the paper.
Bosch & Shabman (1990) use a representative
model of an oyster planting firm to study the benefits of
alternative research programmes. They find that
improvements in seed harvesting technology and
accurate knowledge of the salinity range at which
disease problems occur provide the most potential for
increasing profitability of oyster production. They base
their conclusion on evaluation of the risk efficiency of
Aquaculture Economics
& Management
alternative programs.
Volume 1, Number 1 Sylvia & Anderson (1993) use a multilevel dynamic
1997 model to analyse the effects of alternative policy vari-
pp 45-64 ables on net-pen salmon aquaculture. Their model
deals with the conflicting objectives of decreasing efflu-
ent produced by salmon farms, while allowing salmon
aquaculture to develop as a competitive industry in the
United States. Their model includes simple biological
relationships (based on feed conversion and expected
growth rates), physical variables (farm site depth and
current speed), and policy variables (taxes and controls
on density of cages per site).
The book of Allen et al. (1984) and their various
papers dealing with the bioeconomics of lobster aqua-
culture represent pioneering efforts in the application
of bioeconomic principles to aquaculture. Readers
interested in the field are referred to this book, which
also contains a large list of references.
Model design and development
This section reviews basic concepts in the design and
development of dynamic models. It emphasizes biologi-
cal models, because they are the most detailed and diffi-
cult to develop, and they represent the base which can
be used by many different economic models.
Model components
At the risk of oversimplifying, it can be said that a
dynamic mathematical model consists of variables,
parameters, constants and equations. Each one of these
components is reviewed in turn. This discussion is
largely based on the book of France & Thornley (1984).
The reader is referred to this source for an excellent
treatment of modelling applied to agriculture.
Variables parameters and constants
Variables in a dynamic model can be classified into four
types: state variables, rate variables, auxiliary variables
and driving variables, with some possible subclasses.
State variables define the state of the system at a
given point in time. A set of state variables uniquely
describe the system. Examples of state variables in an
aquaculture model include fish weight, dissolved oxy-
gen and ammonia. The process of dynamic modelling
consists of constructing differential equations which
define how state variables change through time.
Rate variables define processes within the system at
a given point in time. They have dimensions of quantity
per unit of time. These variables cannot be measured
instantaneously (as state variables are) but must be
measured over an interval of time. Rate variables deter-
mine how state variables change through time. Exam-
ples in aquaculture include fish growth rate, rate of
oxygen consumption and rate of ammonia production.
© 19 9 7 Blackwell Science Ltd
 0. /. Cacho • Systems modelling and bioeconomic modelling in aquaculture
Driving variables are data inputs which vary
exogenously with time rather than being endoge-
nously determined within the model. Driving variables
can be used to represent the environment (e.g. temper-
ature, rainfall), management decisions (e.g. feeding
rate, aeration rate), policy variables (e.g. pollution
control, subsidies) or the economy in general (e.g.
input and output markets). In some iterative optimiza-
tion models, the value of a decision variable (e.g. feed-
ing rate) may be adjusted in response to model output
so as to maximize (or minimize) the objective function.
Although it could be argued that the value of such
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variables is endogenously determined within the opti-
mization model, they are considered to be driving vari-
ables since they represent the variables which control
(or drive) the system.
In most dynamic models it is desirable to obtain cer-
tain extra variables to assist in understanding the sys-
tem or to make the model definition more readable;
these are called auxiliary variables. Most variables in a
dynamic model are likely to be of this type. Auxiliary
variables can be rates or absolute quantities (e.g. com-
binations of state variables). Examples of auxiliary vari-
ables include feed efficiency, specific growth rate and
body protein/fat ratio.
Parameters and constants can be defined as quanti-
ties appearing in the model which do not vary endoge-
nously. Constants are quantities that retain the same
value across different experimental conditions (e.g.
molecular weight of glucose, density of water, gross
energy content of fat) and do not vary with time.
Parameters are quantities which can vary in time or
across experimental conditions, but they do so exoge-
nously; examples include maintenance and respiration
coefficients and Michaelis-Menten constants. Values of
parameters might vary with experimental or climatic
conditions, animal (or plant) species and genotype. A
given parameter may have a biological or physical
interpretation (in mechanistic models), or may simply
be a number which produces good predictions (in
empirical models).
Differential equations
A typical dynamic model consists of first-order
differential equations which describe how the state
variables change with time. If the n state variables X lt
X2 Xn describe the system at time t, we require
exactly n differential equations:
dX 1 /d£=/ 1 (X 1 ,X 2 Xn;P;D)
dX n /dt=/ n (X 1 ,X 2 Xn;P;D)
© 1997 Blackwell Science Ltd
53
where P represents a vector of parameters and D repre-
sents a vector of driving variables (i.e. environment,
control and policy variables). Since the system is
defined by n state variables, it is useful to think of a point
in n-dimensional space; France & Thornley (1984)
refer to this as the 'system point'. The position of the
system point uniquely defines the state of the system at
any point in time. The differential equations above
determine the velocity at which the system point moves
through 'system space'. Thus the system point will
trace out a trajectory through system space as the sim-
ulation proceeds through time.
Steps in model development
The modelling literature is full of 'recipes' which
explain, with varying degrees of detail, the steps that
should be followed when developing computer-based
mathematical models. The steps described here are
based on those recommended by Piedrahita (1988).
The reader should be warned, however, that this is not
a linear process. Although some of the tasks detailed in
this section might be pursued simultaneously or itera-
tively, a step by step presentation helps us focus on the
general modelling process. The steps are as follows:
1 Define objectives;
2 Review existing knowledge;
3 Develop a conceptual model;
4 Formulate model equations;
5 Estimate parameter values;
6 Implement computer model;
7 Perform sensitivity analysis;
8 Perform model validation.
Define objectives
The first step is to define the problem to be addressed.
When defining objectives the following must be
included: (i) an assessment of the goals to be achieved
(e.g. maximize profit subject to environmental regula-
tions), and (ii) definition of the system boundaries (e.g.
single pond, whole farm, industry). A clearly stated
objective will help determine what are the relevant
variables to be included in the model.
Review existing knowledge
The literature must be reviewed to determine whether
existing models can do the job. In some cases it might be
possible to combine components from several existing
Aquaculture Economics
models and add new components to meet objectives. & Management
For mechanistic models, it is important to review the Volume 1, Number 1
current knowledge concerning the physiological, bio- 1997
chemical and nutritional causes of fish growth, as well pp 45-64
 54 Systems modelling and bioeconomic modelling in aquaculture • O.J.Cacho
as the chemical and physical interactions which occur
in a fish pond or tank. Review of engineering principles
might also be Important, particularly for models of
intensive systems where the environment is controlled
and water is filtered and recirculated. Another impor-
tant result from the review process is the location of
existing data sources which can be later used for
parameter estimation.
Develop a conceptual model
The design of a conceptual model starts by enumerat-
ing the key variables and their relationships. At this
stage relationships between variables are not formally
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(mathematically) stated, but it may be possible to state
whether a given variable has a positive or negative
influence on another variable. Growth models can be
conveniently based on bioenergetic principles, where
the sources and uses of energy are detailed in an energy
budget. The reader interested in the application of
bioenergetics to fish growth is referred to Brett & Groves
(1979). The conceptual model can be presented as a
flow diagram with boxes representing variables and
arrows representing the flow of matter and energy.
This type of diagram provides valuable insights and can
simplify the development of the mathematical model. A
flow diagram is also useful when documenting the
model and explaining its structure to potential users.
Formulate model equations
The formulation of model equations requires informa-
tion on the 'shape' of the relationships between variables.
Although linear functions are easy to use and manipu-
late, biological relationships are generally nonlinear.
There are numerous functions which have been found to
provide reasonable mathematical descriptions of growth
processes. Ricker (1979) presents a good review of the
types of functions used in fish growth studies, Brett
(1979) reviews the effects of environmental factors on
fish growth curves, and Mercer (1980) reviews some
functions commonly used in nutrition studies.
The Michaelis-Menten function, originally devel-
oped to describe enzyme kinetics, has been widely
applied in mechanistic models of animal growth. This
simple equation has been used to represent uptake and
utilization of nutrients by tissues and has been found to
increase solution efficiency, stabilize model behaviour
and allow estimation of rate constants from experimen-
tal data (Baldwin et al. 1985). Changing the parame-
Aquaculture Economics
ters of the Michaelis-Menten function provides a rela-
& Management
tively simple means of accomodating changes in
Volume 1, Number 1
1997 metabolic properties due to growth and hormonal
pp 45-64 changes. Modifications of the Michaelis-Menten
function have been used to describe nutrient response
data (Mercer et al. 1977) and the effects of temperature
on enzymatic reactions (Eyring & Urry 1965).
Although the use of the Michaelis-Menten function in
fish models is not as widespread as in other animal stud-
ies, it has considerable potential.
Estimate parameter values
Parameter estimation in dynamic models is not a trivial
process, it is as much an art as a science. Although
sophisticated computer packages for statistical analysis
are widely available today, no general-purpose pack-
age exists which can fit a nonlinear differential equa-
tion system to a dataset. Even if such a package were
available, it is unlikely that we would possess the
datasets necessary to simultaneously estimate all
model parameters. The values of some parameters may
be known from work carried out at a lower level of
aggregation than that described by the model, and
some parameters may have values which can be
approximated algebraically, based on energetic, bio-
chemical or physiological principles. However, in most
models we will encounter some parameters whose val-
ues are unknown or poorly known, and they have to be
estimated by fitting the model to experimental data.
This process is known as model calibration.
Assuming that there is a dataset containing the rele-
vant state variables measured at several points in time,
and that the values of driving variables are known, the
model can be calibrated by simulating the experiment
which produced the dataset. The known parameters
are held constant, while the unknown parameters are
given 'best guess' initial values. The model is then run
iteratively until the combination of parameter values
that produces the best predictions is found. Each itera-
tion in this process represents a computer experiment
with a different combination of parameter values. The
sum of squared deviations between predicted and
observed values is calculated at the end of every itera-
tion and the parameter values are modified by an algo-
rithm designed to minimize the weighed sum of
squared deviations. This is a multivariate problem
(unless the model contains a single state variable),
where the predicted and observed values of several
dependent variables are used in the minimization pro-
cess. The weight given to the prediction accuracy of
each state variable is up to the modeller, as is the choice
of minimization algorithm. More details on model cali-
bration can be found in France & Thornley (1984;
p. 27). A treatment of multidimensional minimization
algorithms can be found in any numerical analysis
book (e.g. Press etal. 1986)
© 1997Blackwell Science Ltd
 O.J.Cacho • Systems modelling and bioeconomic modelling in aquaculture
Implement computer model
For most practical problems, the system of differential
equations does not have an analytical solution and
must be solved numerically. This requires using a com-
puter and applying a numerical integration technique.
There are several techniques for numerical integration,
the two most common being the Euler and the Runge-
Kutta methods. Detailed treatment of these techniques
is out of the scope of this paper; however, further infor-
mation can be found in any numerical analysis book
(e.g. Press et al. 1986). The general solution technique
consists of: (i) assigning initial values to all state vari-
ables; (ii) determining the rate of change of the state
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variables by solving each differential equation; (iii) esti-
mating the value of state variables for the next time
period and; (iv) repeating steps (ii) and (iii) for the
desired time horizon.
The actual implementation of the model can be
based on a general purpose language (such as BASIC,
Fortran, Pascal, C, C++), a specialized simulation pack-
age (such as CSMP, ACSL) or a systems dynamics pack-
age (such as DYNAMO, Stella, VenSim, Powersim). Some
of the more friendly systems dynamics packages allow
the user to define the model graphically (by connecting
boxes representing stocks and flows) and have facilities
for graphical and table output, greatly simplifying the
task of exploring interactions between model compo-
nents. However, the trade-off between ease of use and
flexibility must be borne in mind when selecting a pack-
age.
If a detailed biological model is used as part of a
dynamic optimization model (optimal control or
dynamic programming), the only practical option for
implementation is a general purpose language. To the
author's knowledge, the optimization algorithms
required to solve dynamic models are not yet available
in special purpose language. Another advantage of
using a language such as FORTRAN or C is that a large
body of proven numerical algorithms exists in the
public domain, many of which can be freely downloaded
through the Internet.
Perform sensitivity analysis
Sensitivity analysis consists of evaluating the effects on
model output of changes in parameter values. This is
generally accomplished by changing the value of each
parameter in turn, while keeping the values of all other
parameters at base values, and running the model.
Sensitivity analysis results are generally presented as
the percentage change in each output variable caused
by a given percentage change in each parameter value.
Parameters can then be ranked according to their
© 1997Blackwell Science Ltd
55
influence on model results. If the model is found to be
very sensitive to a particular parameter, efforts should
be made to estimate that parameter as accurately as
possible.
Ranking model parameters according to model sen-
sitivity is not trivial; some parameters can have a large
influence on the final value of a given state variable and
no influence on other variables. Also, the sensitivity of
the model to some parameters might be affected by the
initial state of the system. Interactions among parame-
ters can also have important effects on model output.
With large models it is impossible to evaluate the effect
of all parameters and their interactions on model out-
put. It is possible, however, to use factorial designs to
test main effects and first order interactions, and such
an approach was used by Cacho (1990). As with other
aspects of modelling, there is no fail-safe recipe for sen-
sitivity analysis. As the modeller gains experience and
becomes familiar with the model, he or she can develop
creative ways of dealing with the problem.
Perform model validation
Model validation is an elusive goal. Ideally, a model is
validated by comparing model predictions with actual
experimental results not previously used in parameter
estimation. In practice, insufficient data is available for
both parameter estimation and independent valida-
tion. Interdisciplinary co-operation between field
researchers and modellers can ease this limitation. By
designing research programmes where modelling and
field research are used in conjunction, better datasets
can be produced and appropriate validation of some
parts of a model can be eventually achieved.
It is important to point out that complex manage-
ment models cannot be completely validated. There are
too many decision variables and random effects in the
real system to perform a complete validation. We can,
however, gain increasing confidence in the model by
allowing extension agents, consultants, producers and
other experts to inspect the model output and comment
on its realism (or otherwise), strengths and deficiencies.
Other considerations
Input datasets
Complex models may need detailed datasets for initial-
ization, which is not a trivial task. At a minimum, ini-
tial values for all the state variables in the system are
Aquaculture Economics
required, as well as parameter values for the particular & Management
species and location being studied, and other auxiliary Volume 1, Number 1
variables such as length of time step, reporting inter- 1997
vals, convergence criteria, number of iterations for pp45-64
 56 Systems modelling and bioeconomic modelling in aquaculture • O.J.Cacho
optimizing models and so on. Bywater (1990) states: 'in
the development of a production system model, assume
it will cost at least as much to generate the data sets
necessary to run the model as it will to construct it in
the first place'.
Model maintenance
A complex systems model is never finished. Continuing
field and laboratory research provides new insights and
information which must be included to keep the model
current. Also, the economic and regulatory environ-
ments change, necessitating the addition of variables
which were not considered when the model was first
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conceived. Model maintenance must also account for
computer technology developments and advances in
user interface design. Perhaps the most difficult feature
of model maintenance is the need to keep the modelling
team alive. As people in the modelling team move on to
new projects, the effort required to raise funds and train
new people on the intricacies of the model may be insu-
perable and may lead to the model fading away after a
few years. There is no easy answer to this problem, per-
haps the key is to develop the model to a stage where it
proves its value in a real-world decision-making envi-
ronment and becomes self-funding.
An example
This section presents a simple example of a determinis-
tic dynamic optimization model. It is complex enough
to give a flavour for the application of dynamic opti-
mization techniques, yet simple enough to be described
by a few equations.
Suppose that we have a pond, tank or cage to be
stocked with a generic fish species. It is planned to feed
the fish daily and to undertake partial harvesting
throughout the growing season, but there will be no
restocking. The objective is to determine the feeding
and harvesting trajectories through time which maxi-
mize profits over a growing cycle. Depending on the
species in question, a growing cycle may represent sev-
eral years. The problem is
Max 71= J [Rj-CJ (1)
t-0
where Rt and Ct are revenue and cost at time t, r is the
Aquaculture Economics
& Management discount rate and T is the time of final harvest. Assum-
ing that the price per unit of weight is constant and
Volume 1, Number 1
1997 independent offish size, revenue can be expressed as a
pp 45-64 function of biomass harvested at any time (ht) and fish
price (Py), while cost is a function of the price of har-
vesting services (Pf,) and price of feed (Py). Thus:
Rt = htPy (2)
t = htPh+ftPf (3)
Equation 3 assumes linear feed and harvesting costs.
Quadratic, cubic or nonlinear cost functions can be
accommodated by modifying this equation.
The problem is subject to a number of biological
constraints. The amount of fish that can be harvested
and sold over a growing season ultimately depends on
the growth rate of individual fish and the number offish
in the pond. Since we are dealing with a deterministic,
homogeneous fish population, we can refer to the
growth rate of the 'average' fish (dw/dt). Assuming
that water quality is maintained at nonconstraining
levels, the growth rate of the average fish on a given day
is affected by individual body weight (w), the amount of
feed consumed (/), the total biomass in the pond (B) and
water temperature (T):
= $w(wt,ft,Bt,Tt). (4)
Biomass is simply the individual weight multiplied by
the number of individuals (n) in the population:
t = wtnt. (5)
The number offish in the pond cannot increase during
the season, but it can decrease through either harvest
or mortality (M):
dn/dt = -(ht + Mt). (6)
Finally, mortality can be expressed as a function of total
biomass in the pond:
Depending on the objectives of the study and available
information, functions 4 and 7 can be expressed by sin-
gle empirical equations or by a mechanistic model with
multiple equations. The growth function 4 can be rep-
resented by a polynomial (e.g. Bjorndal 1988; Hean
1994), a logistic or Von-Bertalanffy equation (e.g. Tal-
paz & Tsur 19 8 2; Karp et al. 19 8 6) or a detailed bioen-
ergetic model (e.g. Cacho 1990; Cuenco et al. 1985a).
Similarly, the relationship between mortality and
biomass in eqn 7 can be represented either by a polyno-
mial function fitted to experimental data, or by a series
of equations explicitly describing the effects of biomass
and population density on water quality and social
interactions (e.g. food competition and aggression),
and the effects of these factors on mortality.
Following the variable classification introduced ear-
lier, we have:
© 199 7 Blackwell Science Ltd
 O.J.Cacho • Systems modelling and bioeconomic modelling in aquaculture 57

State variables: wt and nt {dH/dh) = (14b)

Rate variables: dw/d£anddn/dt
The Hamilton equations (one for each state variable)
Driving variables:
are then defined:
Exogenous: Tt,Py,Ph,Pf,r
Controlled: (15a)
Auxiliary variables: B(, Mt, Rt, Ct.
(15b)

The optimal control formulation as are the equations of motion

The problem stated above can be expressed in terms of
dH/dXw=dw/dt (16a)
optimal control as:
dHldX=dnldt (16b)
Maxn= j (Rt-Ct)e-rtdt (8)
fr.ht t = o The optimal trajectory through time is obtained by
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solving the system (14-16) for each time period in the

subject to eqns 4 and 6, and:
growing season. Theoretically, the system can be
(9) solved by the following steps:

0<ht<Bt; (10) 1 Use eqns 14 to solve for the optimal controls (f and
fi*) and substitute into eqns 15 and 16, thus elimi-
w(0) = w0; (ID nating/and h.
n(O) = no. (12) 2 Use eqns 15 and 16 to solve for the optimal values,

In the language of optimal control, eqn 8 is called the

functional to be maximized and eqns 4 and 6 are the
equations of motion, which describe the rate of change
of the state variables. There is one equation of motion
for each state variable in the problem. Constraints 9
and 10 place limits on the allowed values of the control
variables (ft and ht). For this problem both variables
must be non-negative. In addition, feed must not
exceed the limit offish appetite (fmax), and it is not possi-
ble to harvest more than the total biomass available at
any given time. Notice that fish appetite (/max) is not
constant, but changes with body weight and water
temperature. Finally, eqns 11 and 12 are the initial val-
ues of the state variables.
The problem is solved by defining a Hamiltonian
function containing the integrand of eqn 8 and one
Lagrangean function for each equation of motion (4
and 6); temporarily neglecting 9 and 10 we have:
Ht = {Rt-Ct)errt + Xwt(dw/dt) + Xnt(dn/dt) (13)
In contrast to the static optimization problem, the
Lagrangean functions (Xwt and Xnt) are functions of
time, rather than single values. In the context of opti-
mal control they are called 'adjoint' or 'costate' vari-
ables
The problem can be solved by Pontyagrin's maxi-
mum principle. Firstly we equate the partial derivatives
of H with respect to the control variables to zero (one for
each control variable), dropping the t subscripts to
avoid clutter:
(14a)
3 Use the optimal values obtained in step 2 to deter-
mine the value of the Hamiltonian (H) for the follow-
ing time period.
4 Return to step 1 and continue until t = T.
In practice, the system cannot be solved analytically
except for very simple functional forms. Fortunately,
the numerical solution is relatively straightforward.
For simplicity of exposition, the solution above has
ignored the presence of constraints in the value of the
control variables (eqns 9 and 10). Introducing them
will cause eqns 14a and 14b to be bound, according to
the Kuhn-Tucker conditions, so that a corner solution
will be obtained if one of these first-order conditions
occurs outside the allowed bounds (the so called
bang-bang control formulation). Formally, we have a
Lagrangean function:
where Ht is as defined in (13), and the first order con-
ditions (14) become:
(18a)
dl/dQf> O,Qf>Q, =0 (18b)
dl/dh<O,h>O,h(dl/dh) = O (18c)
dimh > o, eft > o, eh(di/d eh)=o (18d)
Aquaculture Economics
Such bounded maximization is easily implemented in a & Management
computer model. Before detailing the numerical solu- Volume 1, Number 1
tion technique, the remaining boundary conditions 1997
must be discussed. pp 45-64

© 19 9 7 Blackwell Science Ltd

 58 Systems modelling and bioeconomic modelling in aquaculture • O.J.Cacho
Boundary conditions
As presented above, the problem has an infinite num-
ber of possible solutions. In order to obtain a unique
solution, boundary conditions, which depend on the
particular objectives, must be introduced. So far there
are two boundary conditions in eqns 11 and 12, yet
there are four trajectories to be determined (wt, nt, Xwt
and Xnt). The solution would be simplified if, in addition
to the initial state (w 0 and n0), the initial value of each
adjoint variable (X^ and Xn0) were known. Unfortu-
nately, these values are unknown for most but the sim-
plest problems, as they cannot be analytically deter-
mined, and they must be determined as a second step
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after the main algorithm.
The additional boundary conditions (called
transversality conditions) depend on the terminal
value of the state variables (x) and time (t) as follows:
• If the final value of x is fixed (x(i) - xx), then the
final adjoint value Xx{x) is free.
• If the final value of x is free, then Xx(x) = 0 must be
impossed.
• If the terminal time is free (T will be determined as
part of the solution), then the condition H(x) = 0
must be imposed.
The following restrictions could apply to the prob-
lem:
Final weight is free, therefore:
no fish should remain after final harvest:
(20)
and optimal harvest time will be determined as part of
the problem, therefore:
H(t) = 0. (21)
The numerical solution
The numerical solution, as outlined in Fig. 3, consists of
two nested iterations. The 'interior' iteration solves the
optimal control problem over a growing season, for any
given set of initial conditions, while the 'exterior' itera-
tion solves for the initial adjoint values, based on the
transversality conditions. The solution process starts
by assigning initial ('best guess') values to the adjoint
variables X^Q and Xn0 and iteratively taking the follow-
ing steps:
Aquaculture Economics
& Management 1 Set time equal to zero and assign initial values to the
Volume 1. Number 1 state variables using eqns 11 and 12;
1997 2 Given the current values of w(t), n(t), Xw{t) and Xn(t)
pp45-64 maximize the Hamiltonian (15) with respect to the
controls/ t and ht, subject to constraints 9 and 10. This
step can be accomplished by any multidimensional
maximization algorithm, such as a conjugate gradi-
ent or a quasi-Newton method (Press et aL 19 8 6).
3 Substitute f* and h*, from step 2, into eqns 15 and
16 to determine the optimal change in the state and
adjoint variables, and calculate their optimal values
for the next time step [w*(t +1), n*{t +1), X*w(t + 1)
and X*n(t + 1)]. This step takes care of numerical
integration of the biological model, as eqns 16 are
the differential equations which describe the motion
of the system through time.
4 Move on to the next time period (e.g. increase the
time counter by one).
5 Check whether the terminal time has been reached
(t = T). Recall, however, that this problem assumes
that t is not known in advance. Therefore we must
apply the transversality condition (21) and check
whether H(t) is suitably close to zero (allowing for
truncation error in the numerical operations).
6 If terminal time has been reached continue to step 7,
otherwise return to step 2;
7 Check whether the transversality conditions 19 and
20 have been satisfied. If they have, the optimal
solution has been obtained; stop and save all the rel-
evant results. Otherwise go on to step 8.
8 Adjust the initial adjoint values (X^ and A,n0) and
return to step 1. This step requires the use of a root-
finding algorithm (such as the Newton-Raphson
method). The objective of the adjustment is to find
the initial adjoint values that satisfy the transversal-
ity conditions.
Some concluding comments concerning the
numerical solution of optimal control models are in
I
1=0
maximize H(t),
obtain f(t)*,h(t)*
»(0>=n,'
adjust
obtain »*((+/), n*{t+l),
1 no
A are
^transversal
\
no
conditions .
I end
Fig. 3 Representation of the numerical solution of an
optimal control problem.
© 19 9 7 Blackwell Science Ltd
 O.J.Cacho • Systems modelling and bioeconomic modelling in aquaculture
order. They have to do with the introduction of stochas-
tic behaviour and the use of dynamic programming
techniques.
Introducing stochastic behaviour
Conversion of the problem into a stochastic model can
be achieved in two general ways, both of them involv-
ing multiple runs of the algorithm presented above. We
can either (i) let the environment become stochastic or;
(ii) let one or more state variables become stochastic.
Given the strong influence of temperature on bio-
logical and chemical rates, including fish appetite,
growth, metabolism and oxygen solubility in water,
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temperature represents a prime candidate to introduce
stochastic behaviour into the model. This can be
achieved by associating a probability distribution to the
annual temperature cycle for the location of interest.
The deterministic version of the model is first run, as in
the previous section, and the optimal initial adjoint val-
ues are obtained. The model is then repeatedly run, but
now the temperature for each time period is randomly
selected from the appropriate probability distribution.
Each stochastic run of the model will yield a different set
of optimal paths and terminal time. Results can then be
analysed to determine both expected values and vari-
ability in production and profit.
Notice that, in each stochastic run of the model,
the same seasonal temperature pattern must be simu-
lated repeatedly in order to find the initial adjoint val-
ues which satisfy the transversality conditions for the
given climatic conditions. That is, each run of the
optimal control algorithm should use the same series
of random numbers for the interior loop. This is
accomplished by using the same random seed to ini-
tialize the random number generator each time step 1
above is executed. Say we plan to run 500 cases, then
we can randomly select 500 seeds and use each seed
for one execution of the optimal control algorithm.
Each random seed will be invoked repeatedly as the
outer loop of the algorithm attempts to satisfy the
transversality conditions.
The second approach to introducing stochastic
behaviour is similar to that outlined above, except that
now the probability distributions are attached to the
state variables. The differential equations then describe
the expected rate of change in response to given condi-
tions, the actual change being randomly selected from
the appropriate distribution.
In general, thefirstapproach to introducing stochas-
tic behaviour may be preferred, because it is more likely
that long temperature data series are available. These
series can be used to estimate the expected seasonal
© 199 7 Blackwell Science Ltd
59
cycle and the associated probability distribution(s).
Given enough data, the shape of the distribution, the
question of whether moments other than the mean
change seasonally, and the possible presence of autore-
gressive mechanisms can be determined statistically.
Dynamic programming
The optimal control problem can be translated into a
dynamic programming (DP) framework. This will
increase the number of state and control variables that
can be practically dealt with, and may also simplify the
implementation of stochastic models. Dynamic pro-
gramming is a systematic iterative method originally
developed by Bellman (1957). The optimal control
model can be discretized and expressed as:
T-l
max n = S [Rt - Ct] P' + [R T - CT] P'. (22)
(=0
subject to eqns 4, 6 and 9-12, where p = 1/(1 + r) is
the discount factor.
The second term in the right-hand side of eqn 22 is
the terminal value (the profit obtained from final har-
vest). The dynamic programming formulation places
emphasis on the state variables, rather than on the con-
trol variables. To simplify the description of the tech-
nique define the function:
t = [Rt - Ct] = \|/t( wt, nt,ft, ht). (23)
This is called the one-period return function; it empha-
sizes the fact that current returns depend on the values
of state and control variables. The optimal decision
rules are expressed as:
'ft* =ft(wf " t ) a n d V = Hwv nt)- (24)
These functions show that the optimal values of the
control variables at any point in time depend on the
state of the system. Finally, the principle of optimality is
defined as:
Vt(wt, nt) = max [\|/,(w(, nt.ft, ht
(25)
Equation 2 5 is also called the 'optimal value function'
or the 'recursive equation' and it is the key to the solu-
tion of dynamic programming problems.
The solution of this problem starts by creating a
two-dimensional 'state grid' (one dimension for each
state variable). Each point on the grid represents a dif-
ferent combination of state variable values. Each state
Aquaculture Economics
variable (x) is assigned a lower bound (xL) and an upper & Management
bound (xa); this interval is split into kx equidistant Volume 1, Number 1
points. Thus the distance between each pair of points is 1997
dx = (xH-xL)/(kx-l). pp 45-64
 60 Systems modelling and bioeconomic modelling in aquaculture • 0. /. Cacho
• • * • .
Fig. 4 Dynamic programming grid for a two-dimensional
problem.
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Figure 4 presents a grid obtained by the 'discretiza-
tion' operation described above, with kw = 9 and kn = 7;
there are 63 points (kw x kn) on the grid. The dashed
arrows pointing from t + 1 towards t emphasize that
the problem is solved by moving backwards in time.
The values contained on the grid can be stored in a
matrix of the appropriate dimensions. For this problem,
at least three such matrices are needed per time period
to store each of the optimal decision rules f*(wt, nt) and
h*{wt, nt), and the corresponding optimal values Vt(wv
nt). These matrices will be termed f t , h t and V t , respec-
tively.
The solution is divided into two main steps: (i) pro-
ceed backwards in time to determine a set of optimal
decision rules, and (ii) use the optimal decision rules to
determine the optimal paths for given initial condi-
tions. These two steps can be independently taken.
Once a set of decision rules is determined and stored in
permanent media, it can be used repeatedly to find opti-
mal paths for alternative initial conditions.
To execute step (i), start by estimating the terminal
value for each element in the Vx matrix:
Vz(wv nx) = v T (w r nx) = (Rx-Cx) (26)
then proceed to apply the recursive eqn 25 backwards
in time until the initial time period is reached. In gen-
eral, only two time periods (t and t +1) need to be stored
at a time in memory, because the optimal values for
future time periods (from t + 2 to i) are imbeded in
Vt + y. The solution of each time step will yield
k = kw x kn optimal feeding and k optimal harvesting
policies, corresponding to the elements of ft and h t ,
respectively. These policies are saved to disk and later
used to retrieve the optimal path.
The maximization in eqn 25 can be achieved
through the same type of algorithm used in the optimal
Aquaculture Economics
& Management control problem or, more commonly, the control space
Volume 1, Number 1
is discretized and the maximum is found from among a
1997 limited set of alternatives. Whichever method is used
pp45-64 for maximization, some (or most) of the state variable
values obtained at time t +1 as a result of the combina-
tion of control variables applied at time t, will not
exactly correspond to a point on the grid. Therefore, lin-
ear interpolation must be applied between the appro-
priate elements of Vt + j to find the value Vt+i(wt+1,
n t + 1 ) to be used in eqn 25.
Step (ii), retrieval of the optimal paths, is relatively
straightforward. For the given initial state of the sys-
tem, apply the optimal policies /Q*(W 0 , n0) and h0*(w0,
n0) to eqns 4 and 6 to determine the values w^* and nj*.
Repeat the procedure, now using fi*(w-y, MJ) and
/i1*(w1< Hj) to obtain w2* and n2*, and continue in this
fashion until the end of the planning horizon is
reached. This step requires linear interpolation
between elements of ft and h t to determine the optimal
polices to be applied when the current state is not on a
grid point.
The DP approach can generally handle larger prob-
lems than the numerical optimal control (NOC)
approach, with the added advantage that the recursive
solution yields a set of decision rules which can later be
used to determine the optimal paths for different initial
conditions. In contrast, the NOC algorithm must be re-
run for every new set of initial conditions. The trade-off
is the loss of precision caused by linearizing the inter-
vals between DP grid points.
The DP solution can be refined by using successive
approximations, which consists of initially applying the
recursive solution to a relatively wide grid (with a few
points). This results in relatively large linear interpola-
tion error, but also speeds up the solution and helps
identify the relevant area on the grid. The area covered
by the state grid is then decreased by reducing the size
of the interval (xL, xH), thereby reducing the distance
between points on the grid and improving the accuracy
of linear interpolation as a new solution is obtained.
This process can be repeated several times, zooming
into the optimal solution to the desired level of accu-
racy. For more details on this technique see Boudarel et
al. (1971; p.37). Other detailed treatments of dynamic
programming techniques are presented by Bellman &
Dreyfus (1962), Dreyfus & Law (1978), and Cooper &
Cooper (1981).
Future prospects
In recent years, application of bioeconomic models has
increased in the scientific literature; however, their
application in the management of real-world aquacul-
tural enterprises is practically nonexistent. Shang
(1986) mentions bioeconomics as one of the promising
© 199 7 Blackwell Science Ltd
 O.J.Cacho • Systems modelling and bioeconomic modelling in aquaculture
approaches to help improve efficiency at the farm level.
This 'promise' should not be restricted to the use of
bioeconomic models directly on farms. In all fairness,
efficient production facility designs and management
techniques which result from the use of bioeconomic
models and find their way to the farm, should also be
considered. Although bioeconomics, as an applied dis-
cipline, might fare better when evaluated in this man-
ner, it remains a relatively young discipline, which
requires high levels of technical skills and multidisci-
plinary co-operation for its development.
The suitability of bioeconomics as a tool for interdis-
ciplinary co-operation and its potential ability to help
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design more efficient research programmes is one of its
main strengths. Modelling is not a substitute for field
research, and it will never be. Modelling is an ideal com-
plement to field and laboratory research efforts. The
need for close co-operation between modellers and field
researchers has been emphasized repeatedly in this
paper. The establishment of long-term research pro-
grammes, where the model evolves in conjunction
with field and laboratory experiments, will be the key to
the development of long-lived bioeconomic models.
Perhaps a few existing models will evolve as they are
used in co-operative research efforts, many others will
fade away because of a lack of maintenance.
User interface design is an area which will con-
tribute to the widespread use of systems models and
bioeconomic models. More often than not, models are
too difficult to use by anyone except their developers.
Today, graphical user interfaces offer an intuitive way
for nontechnical users to interact with the computer.
This is important, because the evolution of a model can
greatly benefit from interaction with users who are
experts in areas other than modelling. Making the use
of the model easy and attractive may encourage pro-
ducers, extension agents and other experts to experi-
ment with it. More attention should be paid by mod-
ellers to this important issue in the future.
In recent years, the technique of object oriented
programming (OOP) has received increasing attention
in computing circles. Most of this attention has focused
on the advantages of this technique in the development
of user interfaces and operating systems. However,
OOP also offers interesting possibilities as a tool to
design and maintain complex models (Cacho & Bywa-
ter 1991). The power of abstraction afforded by the
OOP paradigm, which goes beyond the traditional
structured programming approach, allows the design
of models which are easier to modify and maintain.
Entities in a bioeconomic model can be conveniently
represented as objects, these objects can inherit
© 19 9 7 Blackwell Science Ltd
61
physical characteristics and behaviour (attributes)
from 'parent' objects and contain additional attributes
of their own.
To illustrate the role of OOP in model maintenance
imagine an 'abstract' fish, which functions according
to general bioenergetic and physiological principles.
The abstract fish is able to receive dietary energy and
process it for maintenance and growth (attributes com-
mon to all species). The abstract fish's basic attributes
are inherited by several 'real' fishes, each of which has
additional attributes according to species. In a polycul-
ture model, each species occupies a particular niche in
the pond and obtains its food in a different manner. In
an OOP system, when a new species is added to the
pond, the modeller does not have to deal with the
description of a whole new fish, only the characteristics
which distinguish the new species from the abstract
fish need to be defined. The inheritance mechanism can
branch incrementally; carnivorous and herbivorous
fish may inherit attributes from the abstract fish, then
grass carp and silver carp can both inherit most of their
attributes from herviborous fish, with each species hav-
ing a few attributes of its own. Assume that we have a
complex model, populated by several fish species, and
that new research reveals an improved representation
of a basic metabolic process. Under OOP, the new pro-
cess can be simply incorporated into the abstract fish,
and all its 'descendants' will automatically inherit the
new attribute. Contrast this with the need to update
each single species individually in a traditional pro-
gramming model, and the reduced maintenance
requirements of OOP models becomes obvious.
Algorithm design is an area which may influence
the development of bioeconomic models, particularly
those that attempt to optimize a combination of differ-
ent (often conflictive) objectives. Most traditional maxi-
mization algorithms can efficiently solve monomodal
functions (functions with a single peak). However, the
solution of multimodal functions (functions with many
peaks) is more problematic. The most pervasive prob-
lem is the possibility of converging to a local maximum
and leaving the global maximum undetected. Many
'tricks' have been attempted to prevent this problem,
none of them totally effective. Genetic algorithms (GA),
based on the evolution of populations of living organ-
isms, offer an interesting alternative. A GA starts with a
population of 'random individuals', each representing
a possible solution to the problem. Each individual
receives a 'fitness score' depending on how good a solu- Aquaculture Economics
& Management
tion to the problem it is. The fitness score may be a
Volume 1, Number 1
weighed average of performance on different goals (e.g. 1997
attempt to maximize profit and minimize pollution). pp45-64
 62 Systems modelling and bioeconomic modelling in aquaculture • O.J.Cacho
Individuals are given the opportunity to reproduce
(with a probability which depends on the fitness score)
by cross breeding with other individuals in the popula-
tion. The new generation of individuals inherits traits
from both parents. Over many generations, good char-
acteristics are spread throughout the population, as its
less fit members die out. Eventually the population will
converge to a maximum (or a set of maxima). This dis-
cussion is based on Beasley et al. (1993), the interested
reader is referred to this source for further references.
The technique has been successfully applied to prob-
lems which are difficult to solve by other methods, and
it may prove effective in the solution of problems
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involving conflicts between aquaculture and other uses
of water and coastal resources.
Further developments in computer technology, soft-
ware tools, user interface designs, and efficient and inno-
vative algorithms, will contribute to ease restrictions on
the spread of bioeconomic models as management tools.
We can be confident that, eventually, bioeconomic mod-
els will be applied on a regular basis in the management
of aquacultural firms. The most obvious area where
applied bioeconomic models will have an initial impact,
is in the management of intensive production systems of
high-value species. Technically sophisticated systems
that use environmental control and water recirculation
have much to gain from efficient automatic control.
Today, microcomputer based automatic systems are
used to control hydroponic greenhouse facilities. Tem-
perature regulation, air exchange, nutrient mixes and
water flow are among the variables controlled by these
systems. There is no reason why a similar trend should
not occur in aquaculture. Initially, these systems will
probably be controlled according to simple decision
rules. Eventually, more efficient and 'smarter' software
tools will be produced, whether these tools use optimal
control, genetic algorithms or some as yet undiscovered
technique, bioeconomics will have an important role to
play in their development.
Acknowledgements
The author wishes to thank Robyn Hean, John Dillon
and two anonymous reviewers for valuable comments
on an earlier draft of this manuscript.
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