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Efficiency of Individual Transferable Quotas (ITQs) when Fishers are able to Choose Vessel Sizes: An Experimental Approach

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  • Keisaku Higahsida

    ()
    (School of Economics, Kwansei Gakuin University)

  • Kenta Tanaka

    (Graduate School of Environmental Studies, Tohoku University)

  • Shunsuke Managi

    (Graduate School of Environmental Studies, Tohoku University)

Abstract

Employing an experimental approach, this paper examines whether the efficiency of fishery management can be achieved under Individual Transferable Quotas (ITQs) regimes, when fishers can choose vessel sizes. In addition to the most common types of experiments for trading permits, we analyze the situation in which the subjects choose one from two vessel types: a large-scale or a small-scale. The fixed cost for the large-scale is higher than that for the small-scale, whereas the variable cost for the large-scale is lower. We find that the average trading price converges to the theoretical equilibrium price given numbers of both types of vessels. We also find that vessels are chosen rationally in the sense that, the greater is the average trading price minus the theoretical equilibrium price in the past periods, the less incentive subjects have to invest in large-scale vessels. Moreover, quota prices in the first period could influence not only the quota prices but also the numbers of both types of vessels in the ensuing periods, and initial allocation could affect the rational choice of vessels by subjects/fishers.

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File URL: http://192.218.163.163/RePEc/pdf/kgdp57.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 57.

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Length: 27 pages
Date of creation: Jun 2010
Date of revision: Jun 2010
Handle: RePEc:kgu:wpaper:57

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Keywords: Individual Transferable Quotas; tradable permits; experiment; double auction;

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  1. Van Boening, Mark V & Wilcox, Nathaniel T, 1996. "Avoidable Cost: Ride a Double Auction Roller Coaster," American Economic Review, American Economic Association, vol. 86(3), pages 461-77, June.
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