Efficiency of Individual Transferable Quotas (ITQ) Systems and Input and Stock Controls

Author Name HIGASHIDA Keisaku  (Kwansei Gakuin University) /TAKARADA Yasuhiro  (Faculty Fellow, RIETI)
Creation Date/NO. September 2009 09-E-046
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This paper examines whether or not the number of fishers is optimal under an Individual Transferable Quotas (ITQ) program. We consider two cases on the structure of the quota market: (1) cases in which all fishers are price takers, and (2) cases in which large-scale fishers have market power. When all fishers are price takers in the quota market, the social optimum is likely to be achieved given the total allowable catch (TAC) level. On the other hand, when low-cost fishers have market power in the quota market, the inefficiency may be serious: excess entry of low-cost fishers and insufficient exit of high-cost fishers may take place. Moreover, we demonstrate that vessel controls and stock targeting may work for an ITQ program.