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

Author Name HIGASHIDA Keisaku  (Kwansei Gakuin University) /MANAGI Shunsuke  (Faculty Fellow, RIETI)
Creation Date/NO. July 2010 10-E-036
Research Project Economic Analysis of Resource Management in the Fisheries Industry
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Employing an experimental approach, this paper examines whether the efficiency of fishery management can be achieved under Individual Transferable Quotas regimes. We analyze the situation in which subjects can choose from one of two vessel types: large-scale or small-scale. The fixed cost for large-scale vessels is higher than that for their small-scale counterparts, whereas the variable cost for large-scale vessels is lower. We find that the average trading price (ATP) converges to the theoretical equilibrium price (EQP). We also find that vessels are chosen rationally in the sense that, the greater the ATP, minus the EQP in past periods, the less incentive subjects have to invest in large-scale vessels. Moreover, quota prices in the first period could influence both the quota prices and the numbers of both types of vessels in the ensuing periods, and initial allocation could affect the rational choice of vessels.