Instrument Choice in a Fishery

This paper considers regulation formation in a fishery where the aggregate harvest level is fixed. Fishing captains and input suppliers participate in the process under which regulatory instruments such as capital restrictions, entry restrictions, or individual transferable quotas (ITQs) are chosen. The feasible set of regulations must satisfy two constraints: an upper bound on the season length and a lower bound on the profit of the marginal fisherman. In the political equilibrium, where the regulator values the welfare of each group, only one of these constraints is binding. If the zero profit constraint for the marginal fisherman is binding, then the regulator prefers policies that increase effort. A necessary and sufficient condition for this result to occur is that the regulator places extraordinary weight on the welfare of input suppliers relative to fishing captains. If the regulator places less than equal weight on the welfare of input suppliers relative to fishing captains, the season length is pushed towards its maximum. # I have benefited from comments from Chris Batstone, Diane Bischak, Daniel Gordon, John Hillas, Ken Jackson, Basil Sharp, Quinn Weninger, Jim Wilen, seminar participants at the University of Auckland and the University of Calgary, three referees, the Associate Editor, and the Editor. All errors are my own. INSTRUMENT CHOICE IN A FISHERY ABSTRACT: This paper considers regulation formation in a fishery where the aggregate harvest level is fixed. Fishing captains and input suppliers participate in the process under which regulatory instruments such as capital restrictions, entry restrictions, or individual transferable quotas (ITQs) are chosen. The feasible set of regulations must satisfy two constraints: an upper bound on the season length and a lower bound on the profit of the marginal fisherman. In the political equilibrium, where the regulator values the welfare of each group, only one of these constraints is binding. If the zero profit constraint for the marginal fisherman is binding, then the regulator prefers policies that increase effort. A necessary and sufficient condition for this result to occur is that the regulator places extraordinary weight on the welfare of input suppliers relative to fishing captains. If the regulator places less than equal weight on the welfare of input suppliers relative to fishing captains, the season length is pushed towards its maximum. This paper considers regulation formation in a fishery where the aggregate harvest level is fixed. Fishing captains and input suppliers participate in the process under which regulatory instruments such as capital restrictions, entry restrictions, or individual transferable quotas (ITQs) are chosen. The feasible set of regulations must satisfy two constraints: an upper bound on the season length and a lower bound on the profit of the marginal fisherman. In the political equilibrium, where the regulator values the welfare of each group, only one of these constraints is binding. If the zero profit constraint for the marginal fisherman is binding, then the regulator prefers policies that increase effort. A necessary and sufficient condition for this result to occur is that the regulator places extraordinary weight on the welfare of input suppliers relative to fishing captains. If the regulator places less than equal weight on the welfare of input suppliers relative to fishing captains, the season length is pushed towards its maximum.