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A Laboratory Assessment of Tradable Fishing Allowances

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Author Info
Anderson, Christopher M.
Sutinen, Jon G.
Abstract

Transferable allowance management systems are receiving increased attention from fishery managers and stakeholders alike. We use a laboratory experiment in which human subjects play the role of fishers to evaluate the promised economic efficiency of tradable allowance systems. In an experiment designed to parallel the most common rules for trading allowances, we find that allowance prices are only weakly associated with the value of the fishing right it provides. Instead, we find a high degree of price variability, consistent with field experiences. In the lab, this variability hampers convergence and supports speculation, leading to average prices much higher than the equilibrium value of allowances. During this protracted price discovery, allowances are misallocated and efficiency falls. Modifications to the market institutions used in most tradable allowance systems to improve price discovery and enhance efficiency are discussed.

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File URL: http://purl.umn.edu/28289
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Publisher Info
Article provided by Marine Resources Foundation in its journal Marine Resource Economics.

Volume (Year): 20 (2005)
Issue (Month): 1 ()
Pages:
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Handle: RePEc:ags:mareec:28289

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Web page: http://www.uri.edu/cels/enre/mre/mre.htm

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Related research
Keywords: fishery management; ITQs; tradable fishing rights; transferable allowances; experiments; asset markets; Resource /Energy Economics and Policy; Q22; Q28; G12;

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    Other versions:
  4. John Ledyard & David Porter & Randii Wessen, 2000. "A Market-Based Mechanism for Allocating Space Shuttle Secondary Payload Priority," Experimental Economics, Springer, vol. 2(3), pages 173-195, March. [Downloadable!] (restricted)
  5. Charles Noussair & Stephane Robin & Bernard Ruffieux, 2001. "Price Bubbles in Laboratory Asset Markets with Constant Fundamental Values," Experimental Economics, Springer, vol. 4(1), pages 87-105, June. [Downloadable!] (restricted)
  6. Hey, J.D. & Neugebauer, T. & Sadrieh, A., 2002. "An experimental analysis of optimal renewable resource management : the fishery," Discussion Paper 37, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  7. Walker, James M. & Gardner, Roy & Ostrom, Elinor, 1990. "Rent dissipation in a limited-access common-pool resource: Experimental evidence," Journal of Environmental Economics and Management, Elsevier, vol. 19(3), pages 203-211, November. [Downloadable!] (restricted)
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  9. Anderson, Christopher M. & Plott, Charles R. & Shimomura, K.-I.Ken-Ichi & Granat, Sander, 2004. "Global instability in experimental general equilibrium: the Scarf example," Journal of Economic Theory, Elsevier, vol. 115(2), pages 209-249, April. [Downloadable!] (restricted)
  10. Franciosi Robert & Isaac R. Mark & Pingry David E. & Reynolds Stanley S., 1993. "An Experimental Investigation of the Hahn-Noll Revenue Neutral Auction for Emissions Licenses," Journal of Environmental Economics and Management, Elsevier, vol. 24(1), pages 1-24, January. [Downloadable!] (restricted)
  11. Banks, Jeffrey & Olson, Mark & Porter, David & Rassenti, Stephen & Smith, Vernon, 2003. "Theory, experiment and the federal communications commission spectrum auctions," Journal of Economic Behavior & Organization, Elsevier, vol. 51(3), pages 303-350, July. [Downloadable!] (restricted)
  12. Cardenas, Juan-Camilo, 2003. "Real wealth and experimental cooperation: experiments in the field lab," Journal of Development Economics, Elsevier, vol. 70(2), pages 263-289, April. [Downloadable!] (restricted)
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  14. Cason, Timothy N, 1995. "An Experimental Investigation of the Seller Incentives in the EPA's Emission Trading Auction," American Economic Review, American Economic Association, vol. 85(4), pages 905-22, September. [Downloadable!] (restricted)
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