Individual transferable quotas versus auctioned seasonal quotas , an experimental investigation

Fishery policies have largely developed in response to experienced problems. The last major change is the introduction of individual transferable quotas, ITQs. This seems to be a promising policy instrument compared to previous policies. Extrapolating from previous experiences, however, a further investigation of the ITQ system may reveal weakness of this instrument as well and may help improve the policy or stimulate the development of alternative policies. One such alternative may be auctioned seasonal quotas, ASQs. A laboratory experiment of a market with seven fishing firms is used to compare the ITQ and ASQ systems. Compared to traditional laboratory experiments of market institutions, this experiment allows for more realistic dynamic adjustments over time. In this setting, none of the policies are as perfect as economic theory may suggest. The ASQ system provides an automatic taxation of the resource rent, and surprisingly, it may also be the system with the lowest risk of bankruptcy for fishers.