Monopolizing individual transferable quota : theory and evidence

Abstract

Anderson's (1991) conclusion that fishing firms will never find it profitable to buy Individual Transferable Quota (ITQs) to retire and so raise fish prices depends critically upon restrictive assumptions. In particular, alternative contractual arrangements allow firms to profit by buying and retiring quota. Including stock effects provides the same result. The fear of monopolization following the introduction of ITQs cannot be dismissed theoretically. Whether or not it proves profitable to buy and retire quota to raise fish prices remains an empirical question. In New Zealand ownership of ITQs has not concentrated over time. However, substantial amounts of quota remain uncaught and the amount uncaught correlates strongly and positively with quota concentration. Most of the New Zealand catch is sold in the world market making it unlikely that quota is retired to raise fish prices. It may be that fishing firms are retiring quota to improve fish stocks and so lower fishing costs. The data are consistent with this hypothesis.