Economics without Free-disposal: Quota-induced Discarding in Heterogenous Fisheries
Individual quota (IQ) programs are a promising and increasingly common means of regulating fisheries. This paper examines how profit maximizing fishers respond to different types of IQ programs in fisheries where many types of fish are harvested simultaneously. This analysis shows that the most common types of individual quota programs can induce discarding, and that individual quota programs that regulate the value of harvest never induce discarding. Since discarded fish have a high mortality rate, "value-based" individual quota programs are superior to their more conventional counterparts in that they waste fewer fish. The disadvantages of value-based quotas are also examined. Results are driven by the fact that the harvest technology examined here does not satisfy a "free-disposal" assumption. Since this free-disposal assumption is ubiquitous in production theory, and not obviously true, the framework developed herein may be useful for analysing a broad class of problems involving joint production.
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- Sakai, Yasuhiro, 1974. "Substitution and expansion effects in production theory: The case of joint production," Journal of Economic Theory, Elsevier, vol. 9(3), pages 255-274, November.
- Diewert, W. E., 1973. "Functional forms for profit and transformation functions," Journal of Economic Theory, Elsevier, vol. 6(3), pages 284-316, June.
- Matthew A. Turner, 1995. "Value-based ITQ's," Working Papers mturner-95-03, University of Toronto, Department of Economics.
- William J. Furlong, 1991. "The Deterrent Effect of Regulatory Enforcement in the Fishery," Land Economics, University of Wisconsin Press, vol. 67(1), pages 116-129.
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