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Economic Science Association, ESA, conference Rome, June 2007

Individual transferable quotas (ITQ) versus auctioned seasonal quotas (ASQ), an experimental investigation Erling Moxnes System Dynamics Group University of Bergen, Norway. Economic Science Association, ESA, conference Rome, June 2007. The fishery problem.

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Economic Science Association, ESA, conference Rome, June 2007

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  1. Individual transferable quotas (ITQ) versus auctioned seasonal quotas (ASQ), an experimental investigation Erling Moxnes System Dynamics Group University of Bergen, Norway Economic Science Association, ESA, conference Rome, June 2007

  2. The fishery problem • Overfishing, overcapacity, uneven distributions of resource rents, …. • Trial-and-error development in regulations and management systems • Current state of art: • Individual Transferable Quotas (ITQ) • Further improvements? • Auctioned Seasonal Quotas? (ASQ)?

  3. ITQ • Permanent right • Protects the fish • Incentive to minimize costs • Seems to work in terms of profits

  4. ITQ • Distribution of wealth? • grandfathering • discount rates • value increase • Barriers to entry? • Boat and ITQ • Risk? • ITQ value • Need for flexibility? • 40 % of ITQs in Iceland and New Zealand leased out

  5. ASQ • Seasonal right - auctioned • Protects the fish • Incentive to minimize costs • Not in use for fishery management, but: • for radio frequencies, airport slots, water,…, • for fish sales, • potential: ITQ leasing, multispecies, information for TAC

  6. ASQ • Distribution of wealth? • Ignoring custom rights • Automatic resource tax • Barriers to entry? • Boat • Risk? • Volatile ASQ prices • Need for flexibility? • Efficient auction

  7. Laboratory experiment • 2 treatments: ITQ and ASQ • 5 markets in each • Nearly symmetric games (4 low op. cost, 3 high) • Dynamic: Capacity, ITQs, financial assets • Random: TAC, operating costs, and fish prices • Yearly decisions • 30 year time horizon

  8. ITQ

  9. ASQ

  10. Results:

  11. Effici-ency:Capacity>BenchmarkNo differenceITQ-ASQ

  12. Efficiency:Market shares high cost firms > 0No difference ITQ-ASQ Confidence intervals for averages

  13. Price of capacity:Capacity price>6.0 in years 2-4 No difference ITQ-ASQ Confidence intervals for averages

  14. Price of ITQsYear 2 : ITQ price < benchmarkYears 18--: ITQ price > benchmark Similar results in 3 pilot experiments

  15. Prices of ASQsVolatile raw material priceDrops with TAC/tot.cap.

  16. Risk (players experiencing negative equity) • ITQ: 17% • ASQ: 31% Not significantly different (1 out of 5 markets creates the difference)

  17. Risk (variation in equity)Average st.deviations in equity:ITQ: 3846ASQ: 985 Same seed and same subject G1S3

  18. Conclusions • ITQ and ASQ • overcapacity (field data) • high cost boats • variation in equity • ITQ • barriers to entry (ITQ price) • variation in equity (ITQ price) • complicated resource taxation • difficult transfer to ASQ • Further research • professionals, designs

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