Helge Berglann
Research Scientist
Abstract
No abstract has been registered
Abstract
In this article we show benefits of quota flexibility in a single-stock fishery model where one of the firms is allowed to behave strategically in the trading of quotas while other firms in the fishery are price takers. The ex-vessel price for fish is assumed constant. Quota flexibility is implemented through a settlement at the end of each regulation period. In that settlement firms having unused quotas are compensated by a subsidy, while those who have quota shortfalls are obligated to pay a tax. For the same deviation the tax is higher than the reward. Former literature shows that market power under a traditional ITQ system can lead to inefficiencies. However, losses due to market power can be subdued when quotas are more flexible. A simple argument to account for this view is that the competitive fringe of firms in the flexible case have the option to make use of the tax/reward system. Thus, rather than being exploited by the price manipulating firm the competitive fringe might find it better to deviate from the 1:1 “quota — realized catches”- relationship that characterizes competitive equilibrium.
Abstract
In this article we show benefits of quota flexibility in a single-stock fishery model where one of the firms is allowed to behave strategically in the trading of quotas while other firms in the fishery are price takers. The ex-vessel price for fish is assumed constant. Quota flexibility is implemented through a settlement at the end of each regulation period. In that settlement firms having unused quotas are compensated by a subsidy, while those who have quota shortfalls are obligated to pay a tax. For the same deviation the tax is higher than the reward. Former literature shows that market power under a traditional ITQ system can lead to inefficiencies. However, losses due to market power can be subdued when quotas are more flexible. A simple argument to account for this view is that the competitive fringe of firms in the flexible case have the option to make use of the tax/reward system. Thus, rather than being exploited by the price manipulating firm the competitive fringe might find it better to deviate from the 1:1 “quota — realized catches”- relationship that characterizes competitive equilibrium.
