Individual vs. Collective Quotas in Fisheries Management Under Uncertainty

Rights-based approaches (e.g., ITQs, TURFs, collectives/cooperatives) are increasingly popular throughout the world, but there is relatively little theoretical literature comparing individual vs. collective approaches. This paper presents a stylized model that allows for such a comparison in a context where there is harvest uncertainty (and hence the potential for risk sharing) as well as potential moral hazard. The model is used to compare four alternative rights-based scenarios, two individual and two collective. A key feature of the model is the inclusion of a mechanism for paying penalties or buying additional quota when harvests exceed allowances (similar to a “deemed value” system), where the regulator can set the penalty or price. Contrary to what might be expected, the results imply that all four scenarios can yield first best effort levels. However, they have quite different distributional impacts. Because the structure of the underlying incentives differ across the scenarios, the regulator must set the penalty/price at a different level to induce first best effort choices, and these different penalties/prices, as well as the different conditions that trigger them, in turn imply different expected total costs for harvesters. Thus, in this context the choice between individual and collective approaches comes down to a distributional rather than an efficiency comparison.