THE CHOICE OF REGULATORY INSTRUMENT WHEN THERE IS UNCERTAINTY ABOUT COMPLIANCE WITH FISHERIES REGULATIONS

Noncompliance is an important problem for fisheries regulators, and a number of studies have con-sidered optimal enforcement issues within fisheries regulation. Our article extends this literature by studying the implications of noncompliance for the choice between tax and quota regulation. We first develop a general stock-recruitment model of a search fishery with illegal landings and show that com-pliance uncertainty (where the regulator is uncertain about the extent of noncompliance) generates an efficiency advantage for taxes over individual transferable quotas. We also provide evidence that uncertainty about compliance is an important source of uncertainty for regulators. Key words: compliance uncertainty, fishery regulation, illegal landings, instrument choice. Economic overexploitation may result if a fish-ery is not regulated. The costs of an individ-ual fisherman will depend not only on his own catch but, in general, also on the total fish stock available, since the latter will affect the search effort associated with fishing. In addition, fu-ture fish stocks available for a fishery (recruit-ment) are typically reduced as current stocks are harvested. This causes a stock externality problem since the individual fisherman does not have an incentive to take account of the effect that his catch has on the current and future costs of other fishermen through fish stocks. To mitigate this externality, fisheries are regulated throughout the world. Typically, regulatory authorities estimate a total allow-able catch and implement this through some form of individual quota system.1 However, “typical ” does not imply “optimal ” or even desirable, and the matter of choosing among available policy instruments for fisheries regu-lation has generated a considerable literatur