Experimental analysis of the use of fishery closures and cooperatives to reduce economic rent dissipation caused by assignment problems

Abstract

Abstract Assignment problems in quota-managed fisheries are caused by spatial and temporal heterogeneity in the productivity of the stock. If the quota management system is not fully delineated (e.g. harvest rights assigned to particular areas) then fishers will compete with each other and overexploit parts of the fishery where or when the quota unit value is highest (i.e. fishing costs low and/or market price high), leading to economic rent dissipation. This study used experimental economics to assess the effectiveness of fishery temporal closures and income-sharing fishery cooperatives in resolving assignment problems across three different fisheries with varying levels of fisher heterogeneity (i.e. numbers of quota owners and lease quota fishers). While most fisheries were successful in reducing economic rent dissipation under the fishery closure management structure relative to their baseline(s), fisheries characterized by a greater number of lease quota fishers were less effective. This was due to the differential values that lease quota fishers place on the resource relative to quota owners, due to having insecurity of tenure and diminished wealth in having to bid for a quota package and pay for it using their revenue from fishing. Conversely, income-sharing fishery cooperatives were equally successful across all three fisheries in reducing assignment problems relative to their baseline(s). This was because income-sharing created an incentive to coordinate fishing effort, particularly among heterogeneous groups. While requiring further exposition in the field, these experimental results represent a first step in identifying management institutions that may assist fishers under quota management to resolve assignment problems in a dynamic environment.