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UBC Theses and Dissertations

Individual transferable fishery quotas under uncertainty Kusuda, Hisafumi

Abstract

A model of a fishery with an uncertain fish stock is proposed to compare alternative management systems with individual transferable quotas (ITQs). Assumptions of the model include: (1) the fish stock fluctuates randomly year by year; (2) in-season stock depletion is small; (3) the total allowable catch (TAC) set by the quota authorities has a definite relation with the fish stock level; (4) the true value of the stock level is revealed only at the middle of each season, when the authorities revise the TAC; (5) fishers form rational expectations on future quota prices. The principal results are: (a) If fishers are risk-neutral, the share quota (SQ) system and the quantity quota (QQ) system generate the same amount of fishery rent, although the division of the rent between fishers and the authorities under one system is different from the other. If the TAC is proportional to the stock level, the more price-inelastic the demand for fish is, the more likely it is that fishers are better off under the QQ system at the expense of the authorities. (b) A quota tax and a harvest tax that collect the same amount of revenue for the authorities result in the same division of the fishery rent among heterogeneous fishers. The quota tax and the profit tax differ in this respect. Which fishers will prefer a quota tax over a profit tax will depend on fishers' shares of the initial quota endowment and in total inframarginal profits afterward. (c) If fishers are risk-averse, the SQ system and the QQ system are not equivalent in their allocative efficiency. An example shows that the SQ system is potentially better than the QQ system when fishers prefer the latter and the authorities prefer the former. This conclusion has to be modified if risk-neutral traders participate in the quota market

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