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The Efficiency Gains from Fully Delineating Rights in an ITQ Fishery

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  • Costello, Christopher J
  • Deacon, Robert T

Abstract

ITQ regulation relies on a decentralized market mechanism and a single price to allocate access to a stock of fish. The resulting allocation will not be fully efficient if the stock being allocated is heterogeneous or if there are potential gains from centralized coordination of harvesting effort. If stocks are heterogeneous in their density, location, or unit value during the season, harvesters governed by an ITQ policy will not be indifferent to when or where they exercise their quotas. Stocks that are relatively dense and/or close to port will be preferred to those less dense or more remote. Because an ITQ policy assigns the same opportunity cost of each unit harvested, individual harvesters have an incentive to compete for higher valued units and such competition may dissipate part of the fishery's potential rent. A similar phenomenon arises when stock densities vary in an unknown way over space or time, so harvesters must engage in costly search. Individual harvesters governed by an ITQ policy have no incentive to share information on stock locations, which can lead to redundant search effort. We demonstrate that both sources of inefficiency can be eliminated either by defining ITQ rights more precisely or by an agreement among harvesters to coordinate their effort. We develop models that illustrate these effects and identify the factors that determine their likely size. Anecdotal evidence on practices adopted by fishery cooperatives is presented to illustrate the practical relevance of the issues we raise.

Suggested Citation

  • Costello, Christopher J & Deacon, Robert T, 2007. "The Efficiency Gains from Fully Delineating Rights in an ITQ Fishery," University of California at Santa Barbara, Economics Working Paper Series qt56n8x9qb, Department of Economics, UC Santa Barbara.
  • Handle: RePEc:cdl:ucsbec:qt56n8x9qb
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    Cited by:

    1. Keith Evans & Quinn Weninger, 2014. "Information Sharing and Cooperative Search in Fisheries," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 58(3), pages 353-372, July.
    2. Stephanie McWhinnie & Kofi Otumawu-Apreku, 2013. "Evaluating Profit Efficiency of the South Australian Rock Lobster Fishery: Nerlovian and Directional Distance Function Approach," School of Economics Working Papers 2013-18, University of Adelaide, School of Economics.
    3. Costello, Christopher & Quérou, Nicolas & Tomini, Agnes, 2015. "Partial enclosure of the commons," Journal of Public Economics, Elsevier, vol. 121(C), pages 69-78.
    4. Deacon, Robert T & Costello, Christopher J & Parker, Dominic P, 2008. "A Model of Fishery Harvests with a Voluntary Co-op," University of California at Santa Barbara, Economics Working Paper Series qt5hf9269r, Department of Economics, UC Santa Barbara.
    5. John Lynham, 2017. "Identifying Peer Effects Using Gold Rushers," Land Economics, University of Wisconsin Press, vol. 93(3), pages 527-548.
    6. Ralph E. Townsend, 2010. "Transactions costs as an obstacle to fisheries self-governance in New Zealand," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(3), pages 301-320, July.
    7. Quaas, Martin F. & Requate, Till & Ruckes, Kirsten & Skonhoft, Anders & Vestergaard, Niels & Voss, Rudi, 2013. "Incentives for optimal management of age-structured fish populations," Resource and Energy Economics, Elsevier, vol. 35(2), pages 113-134.
    8. Zhou, Rong & Segerson, Kathleen, 2014. "Individual vs. Collective Quotas in Fisheries Management: Efficiency and Distributional Impacts," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170601, Agricultural and Applied Economics Association.
    9. Robert T. Deacon & Dominic P. Parker & Christopher Costello, 2013. "Reforming Fisheries: Lessons from a Self-Selected Cooperative," Journal of Law and Economics, University of Chicago Press, vol. 56(1), pages 83-125.
    10. Burgess, Matthew G. & Carrella, Ernesto & Drexler, Michael & Axtell, Robert L. & Bailey, Richard M. & Watson, James R. & Cabral, Reniel B. & Clemence, Michaela & Costello, Christopher & Dorsett, Chris, 2018. "Opportunities for agent-based modeling in human dimensions of fisheries," SocArXiv gzhm5, Center for Open Science.
    11. Stefano Mainardi, 2021. "Parametric and Semiparametric Efficiency Frontiers in Fishery Analysis: Overview and Case Study on the Falkland Islands," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 79(2), pages 169-210, June.
    12. Yang, Yuwen & Cullen, Ross & Hearnshaw, Edward & Macdonald, Ian A., 2014. "An evaluation of self-governance in the New Zealand Bluff oyster fishery – The indicator system approach," Marine Policy, Elsevier, vol. 43(C), pages 273-282.
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    16. Frank Jensen & Lars Gårn Hansen, 2017. "The welfare gain from switching to tax regulation of fisheries," IFRO Working Paper 2017/07, University of Copenhagen, Department of Food and Resource Economics.
    17. Fell, Harrison, 2008. "Ex-vessel Pricing and IFQs: A Strategic Approach," Discussion Papers dp-08-01, Resources For the Future.
    18. Stephanie McWhinnie & Kofi Otumawu-Apreku, 2013. "Profit Efficiency of the South Australian Rock Lobster Fishery: Nerlovian and Directional Distance Function Approach," School of Economics Working Papers 2013-13, University of Adelaide, School of Economics.
    19. De Alessi, Michael & Sullivan, Joseph M. & Hilborn, Ray, 2014. "The legal, regulatory, and institutional evolution of fishing cooperatives in Alaska and the West Coast of the United States," Marine Policy, Elsevier, vol. 43(C), pages 217-225.
    20. Akihito Asano & Kelly Neill & Satoshi Yamazaki, 2016. "Decomposing Fishing Effort: Modelling The Sources Of Inefficiency In A Limited-Entry Fishery," Economics Discussion / Working Papers 16-23, The University of Western Australia, Department of Economics.

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