Individual Transferable Quota Markets Under Illegal Fishing

The presence of violations and the need for enforcement of tradable property rights systems in fisheries has not receiving much attention in the literature. The theoretical promise of property rights-based fisheries is to achieve a given total allowable catch with a maximum social benefit. One of the assumption for that result is that the system is in perfect compliance. The incidents of noncompliance, however, may affect the performance of transferable property rights-based fisheries in unexplored ways. In this paper, we construct and analyze a positive model of fisherman behavior that operates under a perfectly competitive individual transferable quota system, when recognizing the opportunities for violations of quota holdings, given incomplete enforcement. Considering an ill enforced transferable property rights-based fishery we are able to obtain a number of implications for the performance of the quota market and the economic efficiency of the regulatory system.